Let me preface this by saying that if management pull out a good deal for MPS, or a regional OA deal after 008 that tides us over without dilution - then they've done great by shareholders despite the stresses of the share price, which one would hope would only be short-term in such a scenario.
However, if not raising on IND approval proves to be a blue, then lets quantify what size of blue it is.
If they (just for example) end up raising $40m at $1, rather than at $2 - that's a $20m mistake right off the bat.
However, the difference between conducting partner negotiations from a position of financial strength, rather than one of weakness (amid share-price collapse and dwindling funds in a tight credit environment), could be much more costly because every little decimal point of a % in negotiations could become incredibly lucrative were Zilosul to pass Phase III and be commercialised (DMOAD or not) down the track.
In their recent PAR update, 51Capital said:
Does anyone read that and think that Scott Williams and Co seem to be of the opinion that it could STILL be in PAR's interest to take that $20m hit today? Hold your hands up, get the money in the bank, and move on with strength back into your negotiating position, and into your share price. Do the board have the humility to do this? They would certainly be clobbered by shareholder opinion for the $20m hit - but many might respect the pragmatism. There's a Turkish proverb which says "No matter how far you have gone down the wrong path, turn back." Unless management have supreme confidence in a deal, this idea might have merit.
We have c. 228 million shares on issue. A $40m CR at $2 would have taken it to 248m (8.77% dilution for holders). A $40m CR at $1 takes it to 268m (17.54% dilution).
Dilution is always somewhat unpalatable for holders - but is 17.54% worth boardroom consideration as a hit worth taking? They've told us retailers will be included in any future raise so (albiet for a price) we could all have the opportunity to grab a % of that back at rock bottom prices - safe in the knowledge that it ***should*** mark an upturn in the SP (as the funding question is then removed).
That blowing of $20m would definitely create rancour against the board, and cast doubt over their strategic prowess. I would hope the board wouldn't make strategic decisions due to factors like that - but you never know do you? A CR now after rejecting one in December may even create the impression that the board believe a deal is not on the cards for 2022 - which could then arise as the next big narrative for the bears. However, with cash in the bank, 2022 would no longer be the deadline for a deal - and they would be able to surprise the market to the upside if they got one over the line.
Plenty running through the minds of shareholders at the moment - but gee I hope the board get this right one way or another.
(20min delay)