Biotech Values

[jbog]

BI,

There's dilutive financing and then there's DILUTIVE financing, Genta (GNTA.OB) style.

How about 2 billion shares? That's right, billion, With a B.

The New Jersey-based drug maker, a former Nasdaq stock kicked to the bulletin boards, is struggling to stay alive, so in June it raised $20 million in convertible notes. The catch was that the notes were convertible into Genta common stock at a rate of 100,000 shares per $1,000 in principal.

Do the math: If all the shares were converted, Genta would be issuing 2 billion shares to the new investors.

Yesterday, the conversion started. The stocks value sank from 16 cents to less than a penny on volume of almost 138 million shares.

How does a company make it possible to even start contemplating the issuance of 2 billion new shares? Well, for starters, it gets shareholder approval to raise the total amount of authorized common stock in the company's treasury.

Genta did just that in October, raising the authorized share count from 225 million to 6 billion.

AF