Navidea Biopharmaceuticals Inc (NAVB)

[insideoutsideupside]

Cave, Good post. Thanks for your clarifications.

If you don't mind, I'd like to tweak it, if I may. For an interest rate of 1.4% the BS value is constant at 2.42. The strike price is set at 3.84. BS is essentially calculating the intrinsic value of the the warrants, for the given price and future strike price. Therefore the strike price does not change. Usually the SP will change as well as the terms diminishing over time, but as you stated, these were fixed based on the SEC filing, so BS if fixed at 2.42 (if we assume the fixed interest rate).

Knowing the BS value is essentially constant, the aggregate value of the warrants under the BS calculation is constant as well.

2.42 BS * 3.17M shares = 7.67M fixed for a SP below 3.83.

Additionally the lower end of the BS conversion is fixed at $2. So for a SP for $1, Crede still gets 7.67M/2 or 3.335M shares and Crede's basis stays the same as if it the warrants were exchanged at $2.

The above changes just adjusts up the bottom end of your sp range making it 2.09 to 2.39

So here is how I looked at the financing:

We know the future value give to them under the warrants to be 7.67M. Therefore the value of the stock given in the financing is the difference of this and 30M or $22.33M

$30M = $7.67M in future payment (BS Negotiate value) + $22.33M in stock today.

Calculating the offering price of the initial shares. $22.33M / 10.56M shares = $2.11 / share. 26% discount to market, which seems expensive to me.

Future shares will be given to Crede at a cost to Crede of between $2 or 3.83..but as you showed in your calculation (and adjusted for my corrections above), the weighted SP for initial shares plus BS value of exchanged warrants, is a price per share offering between $2.09 and $2.39.

So even if you look at the deal in aggregate, in the best case scenario, $2.39 is a 16% discount, which is more typical, but that's the very best scenario under the BS alternative.

Where the deal becomes lucrative, is if the SP can push through 3.83 before 6 months and stay there until the warrants expire. This throws the entire above calculation out and fixes the initial 10.56M shares at 2.84 for financing...Crede loses a lot in this situation (but still makes money). Maybe management is confident they can increase the SP within 6 months and keep it there for 2.5 additional years, in order to take out the BS alternative.

In summary, I look at this deal as expensive..with an outside chance of being lucrative.