For What It's Worth

An opinion for what its worth.

Where a company is limited by confidentiality constraints to restrict information to shareholders it is easy to read too much into the limited material provided. At the risk of doing so I will post my impressions gained from clues that I think may lie in the recent AJX releases.

Keep in mind that Moelis is acting as Alexium’s investment banker for US listing. As such the two companies would have a close managerial relationship. Today’s Moelis note appears to have specifically made an attempt to address issues raised by HC AJXers on likely revenue for the June half year and the topic of a possible capital raising.

As I see it one and/or two situations may currently exist.

Alexium is in the ‘quiet period’
One of the requirements immediately prior to US listing is that a company enter a ‘quiet period’ in which it makes no attempt to promote the sale of its shares to prospective investors. Violation of this restriction is referred to as ‘gun jumping’ and results in the SEC imposing a significant delay on the process. Public discussion of the company’s future prospects is viewed as promotion in this context.

It is worth noting that, apart from reconfirming its CY2016 revenue target, the commentary accompanying the June Quarterly describes solely progress made to date in the different market divisions. It makes no reference to future prospects. For the first time a disclaimer has been included avoiding responsibility for any forward-looking inferences. Also for the first time, the condensed newsletter makes no reference to possible future sales and is restricted to comment only on the move to new premises and a general description of the product development process.

The US markets have begun to motor along to new highs, which would be favourable to IPO timing.

A major licensing partnership is imminent
Alexium would have a sudden need for extra working capital if it were to enter a partnership with a large chemical company (LCC) to licence the FR chemistry through its own established production and distribution infrastructure. That is, LCC may wish to completely replace its toxic brominated product with Alexiflam chemistry. There then would be a requirement for Alexium to meet the significant demand to supply the Alexiflam materials and know-how. This arrangement would see a change in the toll manufacturing business model with possible cost sharing, as referred to in the Moelis note. The return for Alexium would be hefty annuity style royalties.

Worth noting also in this respect is that there are several means available to raise capital. Equities issuance is one. Debt is another.

Of course neither of the above suggestions may be correct, but something major does appear to be afoot.