Sorry to bang a broken drum, but I think closing $0.38 despite a positive announcement on Remplir, we can finally put to bed the merit of having rich private WA investors on the registry via an off-market discounted placement. Not privately or publicly owned, brokerage firms, big funds, medical companies, investment houses or banks, just rich private investors (and a small linked bio-tech fund), invested in OCC via a discounted off-market placement.
Real simple. Forget its OCC Take any stock that trades 100,000 a day on average on mkt with 200,000,000 shares on issue trading around $0.40 with two scenarios:
A) Large private investors buy 10,000,000 shares off-market diluting the value of existing shareholders ownership proportion in the company by 5%, at a price of $0.37, investors who don't really carry much clout in the market beyond the extent of their wealth - come on who of us knew of this bio-tech fund before?
B) Large private investors buying 10,000,000 share on-market, If these same investors were that interested, and rather than getting a discounted placement offer, having to rely on brokers to buy massive volumes through a thinly traded secondary mkt at 100,000 shares a day on average.
A, dilutes shareholders; has little share price effect; but undeniably strengthens the company longer-term with an additional $3.5 million on the balance sheet; but otherwise no benefit to existing shareholders.
B, sees sharp price rises as brokers struggle to finesse through 10,000,000 share buying in a stock that only traded some 5,000,000 share (to the date of the placement) in 2024 (seriously guys imagine the price effect of 15,000,000 shares instead being bought in OCC on-market in the first quarter); no dilution; no cash for company; but trading say $0.60 - 80 its far higher mkt cap giving it far higher leverage in financial mkts. And frankly, tell me, per the takeover defence arguments? Is OCC less of a take-over risk with a mkt cap at $160 million mkt cap or $80 million mkt cap?
I mention the relevance of the investors by business - if OCC had done a discounted off-market raise to CSL, J&J, Novartis, the share price effects would be explosive; even the price effects from a decent investment house significant enough to cancel out the dilution effects and I would have not objected such a raise, but this placement the proof is in the puding. Where are these private investors now? Evidently nowhere from the share price and volumes. Even if these investors had been forced to buy even 5,000,000 stock on-market, OCC would be trading way north of $0.38.
I remain as perplexed as the rest of you at the share market valuation of this stock given the excellent prospects and progression of the business (and bought more stock yesterday), but eventually one has to look at these continuous diliutons, no matter the new guise of a "strategic placement" and say enough to management (at the AGM and via informal feedback). A 'strategic placement' is an ambulatory network company like SurgCenter out of the US buying in 5% on expectation of a possible future ATI contract - i.e. synergies - not selling discounted shares to some rich WA punters. I respect the new Chairman's experience and history. He is excellently qualified for the job and the Board much improved, but the takeover defence arguments of this placement can not be reconciled with any convincing financial theory or empircal evidence I have ever seen.
OCC IPO'd at $0.40 with 20 million shares. Until it goes cash positive any youthful bio-tech's history is going to be littered with capital raises and palcements, but we were all set after the Bio Horizon's deal and already at 200 million shares on issue - plenty of which having gone to long departed Directors and new incoming ones via options and share performance awards.
Don't put lipstick on a pig (a small one admittedly at 200 million to 210 million dilution,but to rich investors with little relevance to the business) and tell me its not a pig.
(20min delay)