Replies to post #15714 on GTC Biotherapeutics (fka GTCB)

[gym gravity]

yes, the french gov't believes, and I think it wouldn't be crazy for GTCB to ask for some of that Massachusetts biotech investment money. The state of MA has an biologics program and could benefit from investing in a company with massive FOB potential. Especially with the state's views on healthcare and the posibility of national healthcare, and the degree of cost savings that would be necessary to make communist health care posible. That's why LFB is in it. They value cheap medicine.

[DragonBits]

bp, ok, I will bite. What is the value to LFB of having GTC be a publicly traded company Vs being a subsidiary of LFB?

(Thriving or not.)

[DragonBits]

Bp, every time I look at analyzing GTC situation, I come out with contradictions, complicated decision trees and catch 22s.

So I will leave you with some general thoughts about this situation and others you may encounter in the future. Other than that, you and the board will have to come to your own conclusions how this will play out.

Some believe they can buy in now and sell on any good news, all very well, but if too many try and sell on any good news who gets out first with the profit? So I am really addressing GTC as a longer-term investment, trading is completely different. But in this sort of market there are many stocks selling at a discount without all of GTC’s complications.

Each step GTC takes with LFB puts themselves deeper in their hole. Once the loan goes through, GTC will be liable for another 1.5 million if someone wanted to buy them out. After June 2009, LFB will own 50% of GTC. If GTC can’t pay the loan back by June 30, 2012, .LFB can call the loan and own the company. But LFB will also have a lot of control over any partners GTC wants to take on.

Read the terms of the document carefully, you will see what I mean.

http://secfilings.nasdaq.com/filingFrameset.asp?FileName=0001193125%2D08%2D228015%2Etxt&FilePath=%5C2008%5C11%5C06%5C&CoName=GTC+BIOTHERAPEUTICS+INC&FormType=8%2DK&RcvdDate=11%2F6%2F2008&pdf=

It isn’t that the French Government wants to dilute shareholders out of existence, it more like what choice does GTC have and why shouldn’t LFB do the best for their taxpayers? If at the end of 2009 they need more funding, and the market isn't much different, then they are likely to have to depend on LFB. LFB isn’t going to give them money for nothing; they drive a very draconian deal. They got the cash and they set the terms, with no other bidders GTC has little choice but to agree to LFB terms or run out of money.

I can't judge how GTC's ability to gain partnerships will be affected by their situation with LFB. I say situation because we don't know if the loan will be voted for (95% yes), if GTC will be able to pay off the loan before June (95% no), if someone else will step in to buy out GTC before June 2009 (? %), will GTC current financial situation affect any partnerships (for sure it does, but how?). If GTC gets the loan, and does not pay it off by June 2009, then will LFB convert (90% no). Will GTC institute the RS, seems like it will happen when the time limits run out.

I can tell you from long experience the typical mistakes investors make with new technology. I used to work in a lab where we evaluated new technology, so I had a first hand experience with how technology moved from the lab to the field.

Investors always under estimate the time it takes for a new technology to get from the lab to being accepted in the market place. The first videophone was invested in 1955, by Gregorio Y. Zara, ATT had the first videophone in the early 60s, even today videophone are not widely used in most of the world, webcam conferences are more widely used.

The second mistake investors make is to invest in a company that has a valid technology that works as advertised but isn’t what the market place is working towards. This is a common mistake and difficult to discern if one does not work in the industry. I used to trade Ampex; they had a keepered media technology that would increase computer disc capacity by 10% at a nominal cost. Maxtor signed up for the technology, but the industry wasn’t interested in 10% gains, they were looking for 1000% gains.

The third mistake investors make is in investing in theoretical technology. Hydrogen fuel cells for instance, or I recall a company that I shorted in the 80s that had a holographic data storage beta product.

The forth mistake investors make with new technology is in not recognizing when a truly revolutionary technology is ready for the market place. And once they are in that sort of stock, hold on for at least 2-7 years depending on the type of market one is in and how fast stocks get overvalued. I recall investing in Tellabs in 91 because they had the first ever digital echo canceller. But I sold out after a double, and the stock went on to increase 20 times until the peak in 2000. I was early in inventing but sold out because I had thought everyone knew about the company and everything was priced in. But what I didn’t really factor in was how far ahead of the stock market I had been. Even today at a price of 4.00, if you factor in all the splits, I sold out way too low.

This is all by way of saying, investing in revolutionary technology is very tricky and most often not a good risk reward situation. The truly new technologies that both dominant their space and the management can handle the sitaution are rare.