I'm long because I think the value of the technology is significantly undervalued at the current market cap.
I'm also comfortable with any of the three scenarios that might take place going forward:
1) The reverse split isn't approved and the company finds a partner to inject cash, or sells the assets -- even though Delcath would be negotiating without any leverage, I believe the offer price would be higher than the current PPS the market is assigning today.
2) The reverse split isn't approved and the company files for BK protection. This is the water I love to swim in. I've formed a handful of Official Equity Committees in the past and I know I could do so again if I had the inclination -- with only $15M in debt and a technology I believe to be worth more than that, this is a cash flow bankruptcy rather than one where the debt is significantly higher than the assets. As with the example I've given before, someone owns a $1M house he inherited, has $30k cash in the bank, and owes $200k to a friend. This person might be illiquid, but not insolvent.
3) The reverse split is approved and the stock price drops temporarily. Operations continue as normal and in time, hopefully sooner than later, positive data comes forward. Due to the SPA, the price should immediately respond to what it would be valued at if the FDA had approved it. Doesn't matter what price it's trading at -- the shorts will all cover on that day and I should still be able to profit.
Of course, I'm lucky in that I bought in near the lows. So my risk tolerance is going to be higher than others. And that's fine. We all have our target entry and exit prices and must trade accordingly.
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