A rapid calculation gives the dilluted share price after substraction of the cash bonus for different selling price.
The substraction of the cash bonus from the share price is granted if we sell the IP (Patents+Trade Secrets).
This is because the money will be received by the company before being given back to shareholders (via a return of capital).
But even if we have a takeover with a scheme of arrangement that will allow the buyer to pay the bonus, it will be substracted by the buyer to what he is disposed to pay for each share.
So it is reasonnable to substract the cash pool from what we will receive for each price.
The dilluted number of shares is 1 56 175 442 after the 30 millions options granted to the new CEO (that will vest upon a takeover or a major liquidity event)
. 4DS is sold for 119 000 000 USD or 158 719 573 AUD - No Cash Bonus - Share price = 0,102 AUD
. 4DS is sold for 120 000 000 USD or 160 053 351 AUD - Cash Bonus 8 m$ - Share Price = 0,097 AUD
. 4DS is sold for 350 000 000 USD or 466 822 274 AUD - Cash Bonus 23 m$ - Share Price = 0,284 AUD
. 4DS is sold for 550 000 000 USD or 733 577 859 AUD - Cash Bonus 39 m$ - Share Price = 0,445 AUD
. 4DS is sold for 700 000 000 USD or 933 644 889 AUD - Cash Bonus 55 m$ - Share Price = 0,563 AUD
. 4DS is sold for 1 500 000 000 USD or 2 000 6666 889 AUD - Cash Bonus 135 m$ - Share Price = 1,195 AUD
. 4DS is sold for 3 000 000 000 USD or 4 001 333 778 AUD - Cash Bonus 285 m$ - Share Price = 2,38 AUD
(would be nice if someone check my calcualtion. It is near midnight here and my Excel get sleepy)
I still not believe in a multi-billion dollar take over
Here is why :
- Multi-billion takeover means an exclusive right on the technology.
- Acquiring exclusivity on this technology is not possible anymore.
The right to a low cost licence has already been granted to Western Digital (WDC). Even more, WDC has the right to use anything discovered under the JDA without paying anything (cf 2015 prospectus).- So why would anyone spent billions to buy a non exclusive technology when buying a licence would cost much less and give the right to use this technology ?
- There is an exception : WDC could buy 4DS to get the exclusive right on 4DS technology, as no right to a licence have been granted to another company.
But WDC doesn't seem to be able to do that.
The Western Digital Hypothesis
- WDC have built a very profitable joint venture with the japanese company Toshiba Memory (now Kioxia), to build NAND memory chips. But now WDC have no Fab outside this joint venture and all local research are shared with Kioxia.
- The problem is that all that strategy was based on the assumption that Toshiba Corp was an unsinkable battle ship. But Toshiba did sink or at least it is on very bad shape after the Westinghouse desaster. They had to sell the control of their semiconductor subsidiary Kioxia.
- And now Kioxia is under the control of a foreign consortium controled by Apple and SK Hynix. This situation that was supposed to last just a few months before a definitive solution, had seen no change since 2018. and that means that WDC cannot start something big when being tied to Kioxia.
- For example, they can't offer billions to secure an exclusive right on a revolutionnary technology, knowing that they could not developp it in the joint venture fabs bacause Kioxia will get the recipe and that means that some time in the future, Apple and SK Hynix will also get it ... For free.
- This situation could change, if Toshiba Corp (which hold 40% of Kioxia ) did find a way to reorganise the company in a way that every stakeholders are confortable with.
This was suposed to happen on March 24 Toshiba General Meeting. But sharholders refused both the management solution and the solution proposed by shareholders activists (and the vulture funds behind them).
No solution for Toshiba Corp means no solution for Kioxia governance and no solution for WDC wich remains hands tied because of that.
- The Toshiba crisis reflect the Japanese conundrum. They want to be in the globalised economy but they can"t agree with something that will distroy their culture and their values that have been the source of their success for so many years.
- But the Toshiba agony mays last for years, and at some point the WDC management may decide to get free. That means selling their part of the joint venture to the bain Consortium or preferably to a japanese consortium that would keep the NAND production in japanese hands.
- If they can do that even as the vultures are circling asking for a full surrender of Japan, they could start something new with what they have outside the Kioxia Joint venture : HGST, (=> 4DS) and a few labs here and there.
- But as they are still earning money, I dont think they will do that.
Instead, they will suffer for years with no renewed perpsectives.
And that means that they will not buy 4DS.
Rather they will wait to see if the technology have any success on market. And if it have, they will ask for a licence.
Will cost them almost nothing, so why hurry up ?
They would certainly not pay Billions for a technology just to see Apple and SK Hynix puting their hands on it for free if they get full control of Kioxia.
The best solution now
- A multi-billion take over will not happen.
But that doesn't mean that the company will not reach this value on market and on its own merit.
- 4DS will be in the business of selling licences And if the technology holds its promises, that means huge cashflow from royalties and a corresponding value on market.
- We better forget about a miraculous takeover. There are more profitable ways to go.
A takeover might still happen (why the bonus pool if not), but it will probably be be a merger with an equal, so as to gather some financial strength to build a powerfull licence business.
It will simply be a corporate step in the technology history.CONCLUSION
- Multi-billion takeover suppose an exclusive right on the tech.
- No exclusive right on the tech is possible because Western Digital holds a right to licence the technology
- WDC will not buy 4DS because they are caught in the Toshiba quagmire and can't make any significant move.
- The only clear and free path for 4DS is the licensing business.
- They might merge with another company to run it (and to get listed on Nasdaq) => SPAQ ?
- Price target until there : 0,20$ to 0,30$.
After the takeover : sky is the limit.
... If it works.
All imo, as usual.
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