@col69You are quite right..this is another grubby and frustrating, deeply discounted placing, especially when one considers how much encouraging regulatory progress the Company has just announced.
The problem was that Silviu was boxed in by time constraints on the imminent expiry of his funding option …he literally was about to be time barred by the limited authority to issue this amount of shares until the next AGM, without a very long winded shareholder approval vote. The irony is that Mesoblast apparently received the FDA minutes for its LVAD AA request almost two weeks earlier than expected and found they had little to no time to capitalise on their contents by conducting an investor roadshow. Remember that it is in Silviu’s own interests as a major shareholder to get the highest price possible…and that all retail shareholders have just had the opportunity to subscribe at this price (albeit pre the AA news). As I understand it , Aussie equity rules make an accelerated book build difficult as placements have to give clarity on pricing in advance of investors making commitments. If one major participant refused to budge on a lower tender price they could play a game of chicken knowing that Silviu would have difficulty replacing their participation on the “book” In time.
If 122m shares are placed at 30cents rather than say 35c, the Company has suffered additional dilution of approx 1.5% but I would argue that having less than 12 months cash flow funding requirements at any point in time would have been far more reckless and damaging to the share price. I was not expecting Eric Rose to chip in $1.5m…Why now ? some might ask . Why did he not participate in the earlier opportunity ? I think that tells you all you need to know. Also enrolment of the first patient for the CLBP trial had yet to be announced . This may well have been attributable to not having sufficient funding so they might have been waiting for these additional funds to be secured . Furthermore it is probably easier to find partners with trials underway, patients enrolled and timelines are much closure to approval . I think we would all be much more disappointed if the Company had delayed commencement of pivotal regulatory trials because we wanted to finesse another 5 cents (AUS $6.1m) by seeking additional shareholder approval to issue more equity. The implied NPV loss to the Company from any further delays to the clinical programme would have been substantial.All the above does not exonerate Mesoblast from its failure to attract new investors to the Company and create proper pricing tension when it is issues shares. The Australian equity market gave a feeble response to the LVAD news when one considers that quadruple the volume traded over in the US at much higher prices when the news was first announced . The bottom line was that the Company needed to secure its finances at all costs. It was the prudent course of action…but Mesoblast badly needs to do a capital markets day to explain recent developments in its pipeline. This is a highly complex sector requiring extensive due diligence…going back to the same small group of existing shareholders with the hat..is not the way to proceed in the future . OP
Please do not rely on the facts or opinions expressed in the above post when making an investment decision.
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