Let’s take the bad news first. Including the new warrants, there are now 6M more shares to be placed in the denominator in any valuation analysis, and only $25M of incremental value to be placed in the numerator: $20M from the stock offering itself, another $5.4M when the warrants are eventually exercised at $5.38/share, minus the banking fees.
Adjusting the valuation arithmetic in message #692 (#msg-1981262), the numerator has increased from $595M to $620M and the denominator has increased from 51.5M shares to 57.5M shares. Thus, as a consequence of today’s offering, the quotient (the calculated value of the stock based on the analysis in message #692) has declined by roughly 75 cents from $11.50 to $10.75.
The good news: the additional cash gives the company more flexibility to pursue various development strategies and more leverage in partnership discussions.
Is this tradeoff –a slightly lower underlying value in return for enhanced flexibility and negotiating leverage— a good one for shareholders? I am not privy to the details of discussions with prospective partners nor to the interplay between GENR and the FDA, so I am not in a position to argue one way or the other with much conviction. Given the confidence that I have in GENR’s management, I am inclined to give management the benefit of the doubt and assume that the decision to engage in the stock offering makes economic sense for the company.
-- P.S. 10isman: I have not spoken to the company about the stock offering and I do not intend to. The best way to obtain any additional color is to read the prospectus accompanying the offering. I will do that as soon as it is filed on the SEC website.
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