Great example Bripoz...very clear effect of the impact of dilution on existing shareholders.
Assumed takeover next month at $500 mill could offer us $2.20 per share before this cap raising or $2.90 with no cap raising for 6 months or more.
A few posters have argued that we should take the cash now from an insto while it's available and that it may not be available later, at a higher price. I don't follow this logic at all. The current offer at 61.5c is a discount of 12% from the price of 70c plus in mid-Nov. If we assume the price moves to over $1 without a cap raise on good trial results in three months and, say, over $1.50 with continuing good results with Keytruda etc by June, do you think major instos won't be interested? Do you think it's just possible that they would then think, as VLA's management believes, that a takeover or major partnership deal with Merck or others would be not so far away - at a much higher price?
We know we will have a healthy cash balance by mid-2016 and that we won't have spent a cent of the proposed $28 mill cap raise. If our shares are then over a dollar, maybe even close to $2, we can discount the new issue to an insto from that price. The discount, even at 15%, will give the insto great confidence that they will make a good gain immediately, as well as participating in the jump in price from more trial results or a major deal.
The thinking of those who say 'we need money in the bank now' seems to me like saying "I want to minimise risk and am prepared to accept a lesser capital gain than raising cash later when we need it." So if they don't like the extremely small risk (IMO) of not getting cash in the future, then they should place their cash in risk-free investments - like bank deposits, or infra-structure funds.
If the trials don't work, we won't get the cash. If you believe that they will work, as do the management of VLA and most likely Merck, then don't dilute! We don't need the money now!!!!
VLA Price at posting:
62.0¢ Sentiment: Buy Disclosure: Held
