Cryosite scores $1m legal windfall

Cryosite's balance date cash balance of ~$4m is about to get a 20% boost.

The company today revealed that it will receive $1m within 30 days as full and final settlement of a previously undisclosed legal action against firm that advised it on the sale of cord blood bank assets to second-ranking shareholder Cell Care.

The cord blood deal was aborted after the ACCC launched an investigation.

Cryosite kept its cord blood assets. And a non refundable $500k Cell Care down payment.

Cryosite subsequently told the ASX that its Cell Care contract was drafted by “external lawyers” and it was unaware that its dealings with Cell Care might be illegal.

While Cryosite declines to publicly name them, the identify of the lawyers is known in legal circles and is set to be unveiled forthwith.

In the sequel to the ACCC action, Justice Beach in the Federal Court found that Cryosite had committed two breaches of cartel legislation.

He could have punished Cryosite severely, fining it $10m on each breach. He didn't. Instead, he fined it ~$500k on each breach plus costs of $100k.

Cryosite's management team led by director Bryan Dulhunty and then CEO Mark Byrne would have been relieved that the fines were just 5% of the maximum.

But they would have been further relieved when an empathetic Justice Beach ticked on soft payment terms - Cryosite was obliged to pay just $250k up front with the balance payable over 10 years at a modest $85k a year.

In contrast, there's nothing soft about the terms the "external lawyers" face. It's $1m cash. Now.

What will Cryosite do with the money? The group's debtless so there's no debt to pay down. It has the option of gearing up its semi-moribund cord blood operations. It might mount a takeover. Or it might consider returning $1m to shareholders.

We may get clues at the AGM.

The $1m settlement sum equals 2.1c a share.

I would have thought CTE shares would rise accordingly. Instead, they fell 5% to 5.7c. Market cap dipped to a humble $2.67m.

One buyer evidently sees value. He/she/it has hoisted a bid for 750,000 shares by 33% to 4c. Meanwhile, a large seller at 5.9c has pulled out ahead of today's windfall announcement.

The tight CTE register is further tightening.