Solid, well-measured takes, appreciate these posts where its good points and discussion of opposing views without any attacks.
I agree—this wasn’t management selling down the price, but let’s be real. The broker knew about the raise well before the market did. That’s not a conspiracy, it’s just how these things work. They had to line up instos and sophs for the raise, which means they were sitting on that information while everyone else was trading off the Phase 2 news. No wonder we didn’t get the pop we expected—those who knew weren’t buying, infact might have been selling existing holdings knowing they can buy back lower. Frustrating, to say the least as we all held through the risk of phase 2 trials maybe coming up negative and when they came up positive we didnt get the expected reward, due to this raise on the cards.
And while we don’t know the full story behind the scenes, we do know the result: a capital raise that gives away 40% of the company for $40M—massive dilution.
I would just push back and say a partnership would have been a far better move. Even if a pharma offered the exact same deal, it would have been structured differently—upfront funding, milestone payments, profit-sharing, and possibly no dilution. People act like we "avoided giving away future profits," but that’s exactly what just happened. Instead of a strategic partner, we handed 40% of the entire company (and all future revenue) to outside investors for $40M. It’s the same outcome, just without the certainty of a funding runway.
And that’s the real issue—this raise doesn’t fund the company through Phase 3. We’ll need more cash. So what happens then? Another discounted raise while we’re told, yet again, by David that partnerships are "being explored"?
Would anyone believe it now? My guess now is we have to look forward to mediocre trading, stuck around these levels (1.1-1.2) as the dilution is huge and you have billions of shares now and billions to come that will be in profit 9% just selling at 1.2, which is good return and they even get free options for doing it, so we have all those players to churn through. Then before this $40 mill runs out, they will do a consolidation and another cap raise at a discount. Time will tell.
What should have happened? In my opinion it was simple, no talk with lead managers of a cap raise before Phase 2 results. Let the market properly value ATH—we’d have been looking at 2.5c+. Then, a small $5M raise after a few weeks of trading wherever the market settled (2.5-3.5 cent range imo.) Higher market cap, stronger position, and time to find a real partner.
Instead, we’ve locked in heavy dilution, left future funding up in the air, and taken a short-term band-aid at the cost of real long-term value. A pharma deal would have been the smarter play—no question.
Management botched this. Long-term, the company might still do well and I believe they will, but my faith in their ability to strike the right deals for shareholders? Shattered. One thing they can sort out? Keeping the cash flowing to cover their own paychecks. Some real skin in the game to align incentives wouldn’t have hurt.
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