Ann: $100M Lasers & Ultrasound business sale to Lumibird Group, page-45

Hi Joe, I can see you've thought about it carefully, so credit where it's due. My numbers above are a little crude, I agree. I'd guestimate the tax to around $10M, and I imagine they might hold back a little less than $20M to fund iTrack/2RT, but it's of little consequence to valuation how much is held back: cash is cash, whether they're handing it back to you or investing it in the business. I am fairly optimistic that the cash will be returned in a manner which does not attract any tax (at least in my jurisdiction): a capital return or a share buy-back. But I accept there's risk here.

The key point is that the current market cap of $115M comprises something like $87M (net of tax) in cash, and $28M for the remaining businesses. At the $0.75/share that you say you paid, this is $20M for those businesses.

Some of these figures are probably at least slightly out of whack, but in any case, that strikes me as cheap for the remaining businesses. That said, these are high risk, and potentially high growth businesses. An investment in Ellex post-sale is an entirely different kettle of fish to what it was.

I think you make some good points about corporate overhead, and I agree that the 2RT result was a mixed bag. If that had been a slam dunk we'd be looking at a very different valuation. By way of rebuttal, which I hope time will validate, I would say that I think management has done a reasonably good job with the business to date[*], and I hope they will manage the corporate costs appropriately for the new business. I take some heart from the fact that these businesses will have their undivided attention now. As to 2RT, I find the post-hoc analysis pretty compelling. Sure, regulators won't like it, but to me, it shows that the treatment almost certainly is effective, and in time, this may be proven to a standard to satisfy regulators. Rome wasn't built in a day. It's also my understanding that in some markets, the absence of available alternative treatments may lead to post-hoc analysis being considered. Ellex may therefore get some 2RT sales traction based on the current results, funding a modest-scale operation until a new trial which excludes patients with coexistent RPD can be undertaken.

* This is easy for me to say perhaps, because I first bought in at 17 cents in 2013, and sold most at $1.20 in 2016 before loading up again more recently. An investor who bought in 2016 would probably be less enthusiastic about management.