FRY 0.00% 4.8¢ fitzroy resources limited

Valuation of FRY shares

  1. 676 Posts.
    The FRY/4D-S presentation makes it clear the aim of the 4D-S RTO is to raise enough capital to undertake final steps needed to sell or license the ReRAM IP to an established memory maker, so that 4D-S vendors can exit with high ROI.

    Based on details of transaction provided in FRY announcement dated 13/8/2015, particularly the capital structure shown on page 3, I have attempted to calculate what the market cap and share price need to be to allow the 4D-S vendors to exit profitably.

    To do this I have made some assumptions and to simplify matters I have used an undiluted scenario (performance shares and options not allocated). Someone else can calculate the implications of a fully diluted scenario, my calc is OK for getting the point across.

    Assumptions for undiluted scenario:
    1) 659.1m issued shares (undiluted) include 20m oversubscribed cap raise shares
    2) 4D-S vendors account for 385.6m of the undiluted shares
    3) 4D-S vendors have put in $10m to date (actually says US$10m in presso)
    4) 4D-S vendors aim to quintuple their investment (my assumption and highly debatable)

    Equivalent share price on meeting the assumed 4D-S vendor exit goal = $50m/385.6m = 13c.

    Note that this valuation allows sophs who get in at 2.5c to quintuple their investment also.

    Resultant market cap (or sale price of whole business) = 659.1m * 13c = $85.7m

    The above is a long run (end game) valuation and is highly dependent on what multiple of their investment the 4D-S vendors are hoping to achieve. I may be too optimistic in using a 5 times multiple.

    I also want to make it clear that I am not saying the highest share price possible is 13c; I fully appreciate it could be driven much higher by speculation in the near term.
 
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