Biotech Values

[biomaven0]

>>MNTA now has about 49.1M diluted shares for valuation purposes.

You just hit on a pet peeve of mine. You are calculating "diluted shares" ignoring the dollars the company gets for the option exercise, which exaggerates the dilutive impact.

The correct way to do it is to use the so-called Treasury Stock Method, which uses the assumed proceeds of the hypothetical exercise to buy back a portion of the assumed to be issued shares. As a first approximation, you can use the strike price of the option as the assumed proceeds, although the actual calculation is quite a bit more complex as unamortized compensation expense and any tax benefit credited to APIC are also included.

If you do the calculation correctly you will see that the dilutive effect of an option that is only barely in-the-money is minimal, while the dilutive effect of unvested restricted stock (which is basically an option with a zero or $0.01 strike price) is much greater.