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Anti, from this constructive exchange of views with you it is clear to me that you are not merely a naïve punter and that you have a very good understanding capital market workings and also of the business evolution cycle.

Quite rightly, I think, you use phrases like "trying to survive the hard grind of pushing ahead", "challenging research work", "finite resources" and "a cynical market".
It is hard to be a pioneer, I agree.

And when you say things like "(MSB hasn't) yet reached the point of having a durable business model" and that it is "without any real revenues" and infer, thereby, that that is why it is able to be targeted by short-sellers, then I think the next logical questions have to be:

1. Assuming one knows what you have articulated about the situation the company finds itself, why would one actively invest in such a situation in which the odds are knowingly stacked against the investor?

2. On the other hand, if one believes the investment can be justified despite the lack of business model durability and revenue non-accrual - and therefore the scope exists for capital loss due to shorting activity - then surely one cannot be surprised when it does in fact occur?


But if creating wealth for yourself is the objective of investing in listed equities, then surely it is better to invest in companies that those sorts of challenging phrases do not apply? I mean, stock investing is risky at the best of times given all the imponderables and unknowns.

Why would one actively seek to add to the uncertainty and risk by buying stocks that you know have certain challenges?

Why not simply limit your investment universe to companies that do have durable, hard-to-replicate business models, have dominant market shares, generate free cash flow etc?

My point is, if one buys shares in a business with an established financial track record, then one is able to dimension the potential downside risk.

For example, RMD or CSL or TLS or WES or WOW will - under a range of reasonably probable outcomes - not trade below a certain valuation multiples which are observable based on precedent. So one therefore has a feel for the value-at-risk in these cases.

And the reason I believe it is critically important to dimension the value-at-risk, is because investors under-estimate the damage that gets done to their personal wealth when they suffer a permanent loss of capital.

It’s not just the permanent capital loss than needs to be considered, but the opportunity cost of a favourable alternative (i.e., the investment that was not made, but which went up in value.)

People focus so much on “getting it right”, but my experience from following some investors who have created significant value is that it is not so much that they are able to “jag the multi-baggers”, but that they go to great lengths at avoiding making mistakes. in which their capital gets destroyed permanently.

In other words:

It’s far more about not getting them wrong, than it is about getting them right.


But for MSB, the risk of getting it wrong appears to me to be high.

For it is difficult to derive an intrinsic valuation (and the best testimony to this is that this public discussion board has virtually no specific reference to valuing the business, despite it having some strident believers in the company.)

And without the ability to apply intrinsic value to a company, the share price could do anything.

I mean, who is to say the share price could not get back to $4.00? Or $3.00? Or even $2.00?
It is a $1.5bn company today. I wonder what the intrinsic valuation basis is for that?

Now I know some people will point to the fact that someone paid a certain price for a strategic stake in the company some five years ago; therefore that necessarily forms a benchmark for valuation, but I'm sorry I don't buy that fact alone as justification for value. I have seen many hundreds of corporate acquisitions that have subsequently proven to be completely value-destructive (overwhelmingly, M&A in the listed space tends to unsuccessful).

Just because some board and executives some time back thought the company was worth a certain sum of money, doesn’t make it so.

And indeed the market has been telling us that for a long time now.

An added concern is that “the market” will at some time over the next 12 months be talking about the balance sheet and the need to raise fresh equity in order to continue the funding of the portfolio of trials.

(Of course, maybe not everyone invests in stocks in order to maximise their profits (I'm assuming that you, like me, do not fall into this category of investor). Some people might want to be part of something noble or altruistic, and view the capital allocation as socially beneficial or philanthropic. But even in this case, even a remotely sophisticated investor should be aware of the potential pitfalls and limitations.)

No offence, just sharing some of my own thoughts

Adam