I'm a swiss investor. I manage (as an amateur of course) the portfolio of all my family. We pretty much invest all in same stocks. When it comes to proxy vote, i take care of that for my entire family. So, as usually, when Oxygen Biotherapeutics proxy came, i had to take care of it.
First, we invested in the company because of the very interesting conference that has been made in switzerland in April when they started their project of trial in Switzerland. Right now, all together we own 512 000 shares with an average price of 0,246. I think we have a very solid average price.
Anyway,
I often visit like a lot of amateur investor, public forum to check what others things as it is always very interesting to follow. But i never expected to write a single msg until today as i though it would be helpful to share my thought.
So let's go back to the proxy statement.
Concerning the board reelection, i will vote what the management advice us to vote which is keep the same people. I think it is a non issue and i found no comment on any forum so i do believe everyone will do that. What happens is the second topic, that famous reverse split ;)
So topic 2 :
Reverse split of 15/1.
In front of that i had three different approach possible :
- I don't bother myself in trying to find out if it is better to vote yes or no and i just take my very solid profit and leave. In other word, we sell all the stake (according to the volume we could sell qiuet easily), Well i quickly turned down this option as i strongly believe in the long term potential of the business plan and oxycyte. So it lead me to the two other option :
- Vote Yes or...
- Vote No ....
So, in order to take my decision i made my own research and i also took all the argument in favor and against the reverse split to find out what is the best for us shareholder....
So i will start with the positive argument i found :
- The reverse split will allow the stock to leave the penny stock status. Leaving the penny stock status is a strong advantage because it would attract a far larger group of institutional investor which is what we need to stabilise the stock and limit volatility. It also limit the power of manipulation on the stock that you usually see on penny stock but not on multi dollars stock.
- The revere split will allow the stock to reach a higher market (Amex, Nasdaq or NYSE). The CEO clearly stated in his blog that i would be able to move the company to a higher market. What would that mean ? I guess it would mean according to me many things : Less volatility, better liquidity, less manipulation by the market, more exposure to institutional, more exposure to wall street and media in general, opportunities to access financing at far better term then before etc etc. It would be all in all a major help and boost to the future of the company. I refer to the Q&A on the shareholder forum, it seems that they would love to do other trial then only TBI and very few topical product. But to do so, you need money. If they would try to raise cash in the BB as a penny stock i guess it would cost us, shareholder A LOT, if they try to do that in the amex in front of institutional, i believe it would be financing without too much cost. And along with that it would increase the company value as the business would depend on more potential option then only TBI.
those are the two major advante of the reverse split, i think they are good enough to be consider.
Now here are a sum up of all the negative argument and what was my though on them :
Argument 1 - I found someone in this forum who mentionned a statistical study made by a professor that pretty said : 50% of reverse split stock underperform the market. Well i have to say, this study has no value and doesn't provide valuable information. If you take for example the black swan theory which makes a lot of sense to apply to the market, Historical data cannot forecast the future at all. And more important if you take common sense you realise that his conclusion is pretty much BS. how ? Well as you know, if the market has 2 % gain then every stock that has 2+% will outperform the market, and every stock that has 2-% performance will underperform the market. Now you know the market is the average return of all the stock it contains (according to their weight on the index). So if you take a index that has 100 stock with equal weight.... you will find out that you will always have around 50% of the stock that will outperform the market and 50% will underperform that same market. So great, the study says that half of reverse split stock will underperform and so it means half will outperform. Well that is the same for the entire market and not only Reverse split stock.
Also along with the common sense reason of that, there is another reason that explain why the reverse split doesn't impact the value of the stock and therefor his performance :
- Retail investor always loves split and hates reverse split..... why ?
I think i know why. Let say :
you own 10 000 stock of compny A at 50cents = 5 000$
you own 1 000 stock of company B at 5$ = 5 000 $
Company A apply a reverse split of 15/1 and company B a split of 5/1
It means you now own : 667 stock of A at 7,5$ = 5000 $
and you own 5 000 stock of B at 1$ = 5000 $
But after i think the retail investor think the stock will move back to his pre -(reverse) split.
So he thinks he will have sometime soon : 5 000 share at 5 $ for stock B and 667 stock of A at 50 cents. when you view under that angle, clearly reverse split look like a kiss of death. But i guess people forgot something : It is a kiss of death if the business plan isn't solid or isn't working. Is it the case of Oxbo ? I don't think so. Split or reverse split doesn't change the fundamentals and the value of the company, threfor it doesn't change the market cap.....That is what people need to keep in mind
Argument 2 :
Someone said that oxbo did a reverse split of 10:1 and it didn't work. Sorry to say that but i think it is a pure lie. I made a lot of research to try to find reference about that and i found nothing. I don't think any reverse split happened in the past. Also, if it was the case it would mean that today we would virtually have 3 billions shares before reverse split 1. It doesn't make sense or it would mean that past financing from the precedent management was clearly a KISS OF DEATH for the shareholder.
So i think no reverse split has been done in the past on oxbo
Argument 3 :
We should let earn his value alone by itself and not through a reverse split, and be patient to reach a bigger market. Someone even gave the example of Northfield who reached 30$ with only one product (that didn't even work after all lol).
Well it could be a good point, but once again i don't think so. Here are the reason why :
- Find me ANY OTCBB stock that is above let say 2 $ (i'm not even asking to find a stock at 3$ which is the minimum of the Nasdaq for example or even 5$ which is the target of institutional investment or 8$ that would mean safe position to be in institutional portfolio) just 2$.... you will have big problem to find it. You know why ? Because OTCBB is a small market that kills the value of a stock. The OTCBB limits naturally the stock price... So if you expect that to happen through the OTCBB and natural value of the business plan and the market that will react according to that. I guess patience will not be enough. Take for example the Swissmedic trial begins. Did you see how the stock has been control by the MM? Why, because it is a penny stock in a penny market that attracts no instutional where everybody can be a market maker and plays on the stock..
Also the example of northfield or even biopure or alliance pharmaceutical at their best moment is interesting. You are right, those three stock reached very high price only based on their PR and their one product pipeline (by the way, oxbo is right now only a one product pipeline if you exclude topical and only account for TBI and so far i guess the market doesn't take into account topical as everytime a PR about this appeared we saw no or negative impact on the stock even if the potential of topical division is big). Well they all one think in common (Biopure and Co.) they were in a major market ( in their case the Nasdaq) so they had major exposure which impact their stock price thanks to big investor and institutional that invested in it because it was in a major market. Most of their high happened during the nasdaq bubble where all investor and institutional speculated on biotech and futurist company. And if you look at this period, we saw many stock with nothing interesting that reach billions of market value just because they were in the nasdaq and had a business plan that looked cool. Now if you check Oxbo at that very same time, you could exepct they would explode on the upside along with NFLD and BPUR and Alliance etc... well you quickly find that their upside has been very quickly limited where the competition reached huge level...
Why ? Because Oxbo was and is in the OTC BB and the others were in the major market and had all the avantage that goes with it.
Argument 3 :
it is easier to reach 85c from 50c then 12,75$ from 7,5$.
Well it is wrong, if the business is well execute the stock can reach any level as it is in market cap that you need to discuss. But on the other i would say that it is easier to fall from 85c to 50c then from 12,75$ to 7,5$. Penny stock means very high volatility and high manipulation and usually it is on the downside,,,
Argument 4 :
The share allowance doesn't change so the stock could potentially be diluted 15x more (in other word we could see 95pct dilution). And the management could pay themself millions of stock option.
Well i would say that :
- What would be the advantage of the management to over dilute the stock with no business plan in front of it to justify and capital raise ? It would destroy the value of the company so it would destroy their stock option, the shareholder value and more important it wouldn't attract any institutional.
- In order to raise money, managment would need to get the ok from institutional that are those who brings money (it isn t retail investor) do you think they would accept over dilution and no serious business plan on the capital raise plan
- Don't underestimate the power of the board, Every decision that include stock options or further dilution needs the approval of the board as far as i know and in the board you have some independant director and also Mr PEPIN that represents in some way the shareholders as he is the representation of the main shareholder of the company. I do believe that those guys will pursue the best interest of the shareholder and nothing else, especially Mr PEPIN and the independant director as they don't any other interest to defend then those of the shareholders.
Argument 5 :
Reverse split is the kiss of death and usually means the end.
Well in the case of Oxbo those remark doesn't fit. Why ? Because they don't intend to protect their position in the OTCBB, even better they want to LEAVE it.
Also the reverse split doesn't change the fundamentals and the business plan of the company to there is no fundamental change before and after the potential reversal...so i don't see any kiss of death from the reverse split, The only kiss of death we could see would come from a sudden change in the business model that doesn't please us and the institutional. But so far i have nothing negative to say to their plan.
Argument 6 :
The management and or vatea will earn a lot of money as their warrant or option plan or whatever incentive won't be affect by the split.
Well, i checked and it is false. Every stock option plan, Every SPA and every warrant oustanding will be apply the reverse split. So no body gains from this reverse split and so the comment from people that says that the management wants to try to make huge bonus behind our back without doing any effort doesn't make sense why ? Because their stock option plan is also impact, and the market cap doesn't change... so it means no change in term of value for the company so no change in term of value for the shareholder so no change in term of bonus for the management i guess...
So after studying everything, i think it is in the best interest of the shareholder to vote yes because :
- It allows us to leave the manipulated and highly volatilty penny status
- It opens us the door of a bigger market and that would mean, according to me, a major boost in the future plan of the company and it is a major positive effect for the shareholder
- It doesn't change the fundamental of the company in itself as the management will still be able to execute their business plan and will have to do so to increase the value of the company either in the OTCBB or better in a bigger market
- I don't fear any risk of hyper dilution that would kill the value of the stockholder because i see many protection that will avoid any risk of that kind : Management has a great business plan everybody here supports, so they have no advantage to try to over dilute the stock as it would decrease shareholder value and it would decrease their own value. Also i don't see why the board of director wouldn't take the side of the shareholder as it is a little bit their role, and finally, to raise money the company would need to convince institutionnal and i don't see any institutional giving their approval and their money on a plan that would create hyper dilution and make no sense for the value of the company. Remember that institutional would only give their money if they believe their investment will provide value over time...
- Reverse split doesn't change the fundamental of the company and the stock will move according to his business plan and not the reverse split vote effect. Also i think with a higher stock price (or even better a move to a higher market) we will have a bigger exposure which would lead to better effect if any given good news come in the future whereas now the OTCBB and the penny status kills the effect of solid news sometime.
- I trusted the management and the board of director concerning their very solid business plan so i think as a long term investor (and after doing that little research i made above) i should trust the management concerning their reverse split proposal if they do that it is in the best interest of the busines plan they want to execute so it is in OUR best interest.
I'm sorry for the very long msg and the average english but i wanted to share my vote and explain myself because i found very interesting the entire discussion. I never though i would contribute and in fact i did but i have to admit the subject was worth the contribution he he he.
good luck to all ,-) and stick to your stock if you are a long term investor as i think their business plan is huge and could provide great upside for all of us
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