Here is how an acquisition would likely work. Let's say some doctor wants to buy the Patents and I'll give a couple examples. One alternative would be that the first $49.7 million of the purchase price would go to pay off YA's $49.7 million of debt and anything over that amount would get split up among the current common shareholders. Another alternative is that YA would convert the entire $49.7 million to 7 billion shares of common stock.
The alternative that YA elects would be based on how much money was offered for the patents. For example, if it was $49.7 million or less, YA would not convert anything and would take 100% of the selling price, leaving nothing for the common stockholders. In that scenario, NEOM would have no further business and the common stock would have a value of zero.
An example where YA would convert to 7 billion shares would be if a sale of the patents was for $100 million. In this case, YA is better off by converting to common stock where it would then own 87.5% of the common stock and its share of the $100 million would be $87.5 million. In this scenario, the $12.5 million for common stockholders that own the 1 billion currently outstanding shares would be worth about $.0125 per share ($12.5 million divided by 1 billion shares). So my conclusion is that in a $100 million sale of the patents the stock is currently over valued.
I am using the above values as a simplified illustration of how I believe YA would react under those two patent valuation scenarios. It is hard for me to believe that the patents would command a price anywhere near $50 million when revenues are declining quarter over quarter and gross profit was negative for Q4. However, I think the take away is that to justify the current stock price for a long term holder, the patents would ultimately need to be worth more than $100 million. And that is a price that even some doctors may flinch at!
