"Expected Value"

Thanks to all those members contributing to the PAR discussion in recent years. This is my first post on the subject. I've loaded up the truck with PAR shares and happy to play the long game.

I know there has been some discussion regarding discounted cashflow or terminal value type valuations. From my point of view I like to think of this type of stock in a different way. "Asymmetric" was a term used by at least one investor.

Mr Market (a Ben Graham idea I think) offers you a bet. He will toss a coin. If it lands on heads you lose all your money. If it lands on tails he will give you 10 times your money back. Expected value for every 1 dollar bet is in this case, 50% of $10 = $5. That's a pretty amazing bet. OF course that doesn't mean you can't lose all your money, but if you took that bet 1000 times (1000 coin tosses with 1000 different investments) then you would likely get a very good return.

Applying the same idea to PAR. IF all goes to plan then what is the "payout" for Zilosul (the payout could come as a one off, or a share of revenue, or a mix but let's assume it's just a one time payment/value for simplicity ). One could argue quite convincingly that it is is somewhere from $A10 billion up to something WAY HIGHER (DMOAD designation achieved and successful phase 3 - who really knows what sort of value could be put on this drug). So if we work with $10 billion and round the shares on issue to 200 million (for ease of calc) then we get a $50 a share valuation.
Let's stick with a coin and assume that it's 50% likely that PAR succeeds in successful P3 trial (maybe the coin is weighted slightly more one side than the other). so the expected value is 50% of $50 = $25. Which is a phenomenally good "bet" for the current price of $2.54

Other thoughts:

"Slipping timeline" some might say. At this sort of potential return then does it really matter whether or not you wait 2 or 3 or 4 years for it.

Where is the risk?
- Well obviously you can basically lose all of your investment if the trial doesn't go as planned.
- Maybe another better drug developed - but that drug would take years to get to market.
- a major financial meltdown affected funding of treatments, deals.
- manufacturing problems.

More upside? for sure. $10billion could be extremely conservative.
Valuation downside? well A$5billion is still roughly 10 times the current market cap.

Maybe P3 has a much better than 50% chance of success - which makes it an even better bet.

The above ideas are why some people are saying this stock price is "way out of whack". It really doesn't matter whether or not an approved Zilosul is worth A$10billion, US$10billion, $50 billion. Has a chance of success or 40% or 80%. The "expected return" is so far out of whack with the current share price - that is why some people are getting very excited.

"People were selling today as low as $2.51" Who cares, I'm playing the long game. " I should have bought when the price was $2.00". Does it really matter if you buy at $2.00 or $3.00, as long as you get onboard.

To quote those legendary investors The Choir Boys:
"Baby, you were always gonna be the one.
You only ever did it just for fun.
But you run to PARadise"

PS. A high expected value still doesn't exclude the possibility of losing your entire investment!!!!!