Ann: Annual Report and Notice of Annual General Meeting, page-42

The real problem for Biotron management is which mechanism to use for the CR. Over the years they have tried so many different ways to run a CR and have had mixed success. In 2009, 11 and 15 they ran an SPP but two of these were failures (32% takeup and 22% takeup). In 2014, 17 and 18 they ran rights issues which were all successful (fully subscribed or over-subscribed). They have also done placements on a number of occasions and an interesting pro-rata options entitlement offer back in 2009.

On the face of it you would think that they would favor the Rights Issue over the SPP however its important to note that the two SPPs which failed had the smallest discount of all the capital raisings since 2009. These only had 15% and 18% discounts respectively. Since 2011 the discount on all Biotron CRs has increased significantly and ranged between 23% and 51%. At those discounts its easy to see why they were all fully subscribed.

Management have another problem to consider. 38% of its shareholders hold less than $480 of stock in the company, ie not even a marketable parcel. Worse still only 16% shareholders own a parcel of shares valued at $4800 or more. Management know that if they do a rights issue they are expecting about 15% of shareholders to stump up 83% of the money to be raised. Most of their eggs are in a small basket.

Under a pro-rata rights issue 38% of holders would be restricted to contributing less than $60 each (assuming a $4m target). Extrapolated, this also means that about 84% of shareholders would be entitled to contribute less that $600 each. Given this its easy to see why management might be questioning if the top 100 or so are likely to take up their full entitlement. If not the offer might fail to raise the required money so they may favor a SPP instead.

Since an SPP in inequitable its easy to see the top 100 getting rather pissed off if they did this due to the dilution. Might they hold off until after the AGM if they intended to do this to avoid the backlash?