Pete, I think this stock has a significant chance to be a 10 bagger and more. That is why I am way overweight. I have been impressed with management's ability to deliver and I am impressed with the quality and experience of the folks being added to management and the board. HOWEVER, I cannot agree with your apparent view that XXII is a slam dunk success. It seems to me that you completely ignore the capacity of human beings and governments to foul things up. Also events often conspire to frustrate our plans (the "Black Swan").
What XXII has going for it, in my view, is the extreme value of the patents and the fact that there are numerous opportunities for success.
First, there is the BAT license to se the patents in research. Given the $7M up front payment and the continuation payment, I have to believe that it is likely that BAT may develop a product they want to distribute. That would require a commercial license and put money in the pocket of XXII. Moreover, such a commercial license would likely encourage other major tobacco companies to license the use of the patents, for even more money. In such a situation, BAT would likely want to buy out XXII, but that might cause a bidding war with other majors. (XXII seems to have a lot of RJR alums.)
Second is the possibility that XXII can develop, produce, and market its own brand(s) of cigarettes in the US or other markets. This alone could make XXII a several billion dollar company.
Third, there is the possibility that the FDA may require, or allow advertising of, a reduced nicotine content in some or all US cigarettes after it completes its research with XXII low nicotine cigarettes. Only XXII has the capacity to provide low nicotine tobacco suitable (tasting) for such a product. Licenses for the cigarettes produced in the US by some or all of the major producers would be a huge revenue boost. Again, a billion dollar company or a buyout.
Key near term events for XXII are approval to begin making cigarettes, the actual initiating of production, and the up-listing of the stock so that it becomes possible for institutions to buy. I will not count these as done until they are, in fact, done. Nothing here is a foregone conclusion, but the odds do seem to be on our side.
One big danger I see flows from the valuation of XXII. The current valuation is tiny, which allows room for huge percentage appreciation, but also restricts XXII's financial resources. In the event of a challenge to XXII's patents and prolonged litigation, it seems to me that XXII might lack the resources for a long fight. Remember, patents are not self executing. They have to be asserted and defended in court, often at great expense.
All in all, I see XXII as a GREAT OPPORTUNITY. I think the odds are in our favor. I am overweight XXII. But there is no such thing as a riskless investment. Our rosy scenarios can be destroyed by human error or by governmental action, and XXII is not big enough to absorb a number of hits. I applaud your enthusiasm, but do not psych yourself into believing that this opportunity cannot fail. It can. It might. And I will not bet the farm!
AI
