Weekend discussion: Most of you know I'm about
Post# of 36536
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Posted On: 03/27/2020 9:53:40 PM
Weekend discussion:
Most of you know I'm about as bullish on GNBT as they come. However, that voice inside of me that says, "Hope is not a strategy" keeps popping into my head.
I'm sure some of you have had similar thoughts. So, in all seriousness, please poke giant holes in the simple analysis of the NGIO spin I am about to post... since I continue to feel skepticism building as the clock ticks on, and NGIO is one of the very few levers we have to pull at this point.
(Note: Some numbers are being rounded for simplicity, but they are not materially different from reality.)
______________________________
Step 1: Let's say I'm a wealthy investor or a fund manager that met Joe at the Wainwright conference, and I've taken a deep dive into NGIO. I'm very convinced that NGIO has a great team and great IP, and I'd like to invest a good chunk of change. I decide to meet with the investment bank with the goal of buying 10MM shares thru the IPO.
Step 2: My meeting with the bankers provides me with the following information:
There will be 400MM shares of NGIO. GNBT shareholders hold approximately 40MM, Joe is keeping 280MM shares for GNBT, and that leaves 80MM for the IPO.
Let's assume the spin price is $4/share to get NGIO directly to the Naz. So I can buy the 10MM shares I want for $40MM thru the IPO and acquire a 2.5% holding of NGIO.
My team and I do some analysis. "That sounds like a worthy investment", I think to myself!
Step 3: One of my minions at the office comes to me with the following analysis, after doing some further DD on Generex and its NGIO holdings...
"Hey, boss... There are 80MM shares of GNBT outstanding. GNBT will own 280MM shares of NGIO after the spin. So, indirectly, each share of GNBT will "own" ~3.5 shares of NGIO.
So instead of buying 10MM shares for $40MM thru the IPO, let's buy shares of GNBT right now on the open market. It's currently trading for about 50 cents!
We could start buying now, before the IPO. Even if the upward pressure of our buying pushes up the price, we could probably buy 4MM shares at an average price of $2. That would cost $8MM, and we would effectively "own" 12.5MM shares of NGIO (3.5 x 4MM), indirectly giving us a larger stake (3.125%) for 20% of the cost of doing it thru the IPO.
PLUS, we'd have about 5% ownership in Generex... and just look at all the irons they have in the fire!"
Step 4: I give my minion a raise and begin to buy GNBT shares the next trading day.
_______________________________
Holes I see in my argument:
1) GNBT is not on a major exchange, so many of these theoretical buyers are not allowed thru their entities to buy GNBT shares.
2) A larger entity may not want to get mixed up with GNBT and all of its dirty laundry, so they are not interested in this approach and would prefer to buy the "clean" shares of NGIO.
3) Nobody knows about this tiny little OTC company. (I'll refute this point right now, as any of the prospective participants in the IPO certainly know a lot about this little company if they are considering buying into this IPO.)
Is that it? Are those the only barriers that keep an upcoming spinoff that is implied at a $1.6B value (400MM x $4) from telegraphing any value to GNBT shares right now? If I had oodles of money to invest and believed Joe's story, would I not find a way to go thru GNBT ownership instead of getting run thru the price wringer with the NGIO IPO?
Again, please show me what I'm missing here.
Thanks, and have a great weekend!
Most of you know I'm about as bullish on GNBT as they come. However, that voice inside of me that says, "Hope is not a strategy" keeps popping into my head.
I'm sure some of you have had similar thoughts. So, in all seriousness, please poke giant holes in the simple analysis of the NGIO spin I am about to post... since I continue to feel skepticism building as the clock ticks on, and NGIO is one of the very few levers we have to pull at this point.
(Note: Some numbers are being rounded for simplicity, but they are not materially different from reality.)
______________________________
Step 1: Let's say I'm a wealthy investor or a fund manager that met Joe at the Wainwright conference, and I've taken a deep dive into NGIO. I'm very convinced that NGIO has a great team and great IP, and I'd like to invest a good chunk of change. I decide to meet with the investment bank with the goal of buying 10MM shares thru the IPO.
Step 2: My meeting with the bankers provides me with the following information:
There will be 400MM shares of NGIO. GNBT shareholders hold approximately 40MM, Joe is keeping 280MM shares for GNBT, and that leaves 80MM for the IPO.
Let's assume the spin price is $4/share to get NGIO directly to the Naz. So I can buy the 10MM shares I want for $40MM thru the IPO and acquire a 2.5% holding of NGIO.
My team and I do some analysis. "That sounds like a worthy investment", I think to myself!
Step 3: One of my minions at the office comes to me with the following analysis, after doing some further DD on Generex and its NGIO holdings...
"Hey, boss... There are 80MM shares of GNBT outstanding. GNBT will own 280MM shares of NGIO after the spin. So, indirectly, each share of GNBT will "own" ~3.5 shares of NGIO.
So instead of buying 10MM shares for $40MM thru the IPO, let's buy shares of GNBT right now on the open market. It's currently trading for about 50 cents!
We could start buying now, before the IPO. Even if the upward pressure of our buying pushes up the price, we could probably buy 4MM shares at an average price of $2. That would cost $8MM, and we would effectively "own" 12.5MM shares of NGIO (3.5 x 4MM), indirectly giving us a larger stake (3.125%) for 20% of the cost of doing it thru the IPO.
PLUS, we'd have about 5% ownership in Generex... and just look at all the irons they have in the fire!"
Step 4: I give my minion a raise and begin to buy GNBT shares the next trading day.
_______________________________
Holes I see in my argument:
1) GNBT is not on a major exchange, so many of these theoretical buyers are not allowed thru their entities to buy GNBT shares.
2) A larger entity may not want to get mixed up with GNBT and all of its dirty laundry, so they are not interested in this approach and would prefer to buy the "clean" shares of NGIO.
3) Nobody knows about this tiny little OTC company. (I'll refute this point right now, as any of the prospective participants in the IPO certainly know a lot about this little company if they are considering buying into this IPO.)
Is that it? Are those the only barriers that keep an upcoming spinoff that is implied at a $1.6B value (400MM x $4) from telegraphing any value to GNBT shares right now? If I had oodles of money to invest and believed Joe's story, would I not find a way to go thru GNBT ownership instead of getting run thru the price wringer with the NGIO IPO?
Again, please show me what I'm missing here.
Thanks, and have a great weekend!
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