I really don't get the issue that people on here are unhappy with dilution. we're an early stage bio tech company with no sales or profit. we know trials take time and a lot of money. how do people expect the trials to be funded?
there's no such thing as non-dilutive funding!
a few options:
1) exisiting shareholders only: not all retail have the ability to top up in a SPP and they are expensive to administer
2) big pharma deal: big pharma commit to provide funding for trials. if they don't take equity now then they'll want a bigger slice of the pie in future sales/profits. would we be happy to get $50m in funding, no dilution to equity but give away 20%, 30% or even 50% of future sales/profits? even 20% of potentially billions in sales is worth more than our current market cap!
3) insto placing and rights issue. also worth remembering the rights issue is raising more than the insto placing which is rare, so the company is looking after current shareholders. and given current shareholders options which could be very valuable in future (especially compared to new shareholders who get on board later). yes this is slightly dilutive but not as value decretive as giving away future sales/profits.
as with all these things, it's about risk/reward. the company has done the right thing to protect long term shareholder value.
if you don't like the risk of a CR, then go and invest in a cash generative business like Coles or Woolies. no chance of a CR and you'll even get a few dividends. but then you won't get the upside of many times your return on investment. again, it's all about risk/reward.
a big pharma deal might not be dilutive to current capital but would be to long term shareholder value.
don't get hung up on short term price activity. we all know why we invested...so many catalysts on the horizon.
I think once people realise the potential value of these options within the next 3 years, they'll understand why it's a good deal for current shareholders.
