Rebuttal: "Why pay $10/s BO not 55c?"
A common argument I've been reading by the shorts is "why would a major biotech or Pharma company pay over $10/share for a buyout when you can currently buy shares on the open market for $0.55/share?" (don't you love it how they keep pushing the goalposts back now that DCV is almost at the finish line?) Great question, but terrible argument - and one that is easily dismantled.
You need to remember that current market price is highly contextual to the volume of shares being sold. Right now NWBO is averaging 2M to 3M of shares per day. In terms of total market cap, we have somewhere between 1B to 2B shares outstanding (let's use the more conservative 1B even for the sake of this argument). 3M / 1B = 0.3% of outstanding shares - in other words practically nothing significant is being traded on a day-to-day basis.
In order to BUY 100% of NWBO shares, there needs to be someone willing to SELL them. Currently, with such little actual trading volume, most of these SELL orders are being placed by day-traders just looking to make a quick buck. These are people who have very little in the way of patience and understanding of what NWBO's value is actually worth - so it makes sense they would only value the stock at its current price.
If a Pharma company attempted to buy the company on the open market in 1 day (100% purchase of all shares), the following would happen:
1) First 3M (0.3%) shares would be bought at 55c from sellers who have no clue of the company's value
2) Then next 7M (0.7%) shares would be bought at a much higher price, because now all of a sudden you're dealing with sellers who have a more long-term mentality in mind. So the price would shoot up to compensate - probably to around 90c.
3)It is extremely rare to see NWBO's daily trading volume exceed 10M shares... there's a handful of days it actually has happened on and the price tends to swing wildly on those days. All of a sudden there would be a massive shortage of shares on the open market. You'd also start seeing margin's get called for short positions, so the demand for shares would further increase.
4) After the first 10M sold, your now dealing with SELL orders from an entirely different class of investor - people like me, who understand the true value of the product and are totally unwilling to sell for pennies on the dollars. I would expect you could probably shake out a good 50M shares for between $3 to $5, as I would probably sell a small bit of my holdings at these prices to fully de-risk the investment.
5) We're now at 60M sold... roughly 6% of the company... practically nothing. To find more available shares for purchase, you're now dealing with the real fortress of where NWBO shares actually lie - C-level executives like Linda powers, whales like thermo and bigger, and 10yr NWBO retail holders who are ticked off at the whole process and have target prices anywhere between $20/pps to $100/pps. These people absolutely know what they hold, and are willing to wait indefinitely for what they perceive as DCV's true value. Also, at this point, we're so far into the green, that our investments have been fully derisked, and no one has any real financial motivation to sell.
6) You're now looking at a market cap of $20B, and all of a sudden this "open market buyout" isn't working out too well. Momentum is building, margins are getting called, and NWBO's ticker is all over the news for its meteoric rise in price.
Conclusion
The above is why no real interested party would attempt to buy NWBO on the open market. It would unleash an avalanche in price and you'd end up paying far more for the company than if you just negotiated a fair BO price with LP.
Bullish
