Can't resist this thread, so I'm back from my self imposed exile.
Like any investment decision a buyback should be judged against the next best available investment option, with concerns about liquidity taken into account.
In an ideal world I'd like to see the share price continue to drop to close to NTA. The board then start a large buyback. However, that ignores the share price risk that Lakey wisely referred to and assumes that the board can time the market.
I believe the share price risk is real. Buy outs are priced off recent weighted average share price with a margin applied. Put yourself in the position of a large pharma. You're worried about your patent cliff. You want to limit you cash flow expenditure on drug development as your revenues will be falling. Here is an opportunity to buy a potential blockbuster drug with development fully funded cost plus. Plus you get a few other exciting compounds. Biota is surely one of the most attractive acquisition targets in the global biopharma space.
So the board should be thinking about a buy back, assessing it and weighing it against other investment opportunities. They are probably doing that and much more besides.
If Biota need every cent for drug development then their risk is incredibly high and with any large CFs many years away the present value of those CFs would be low due to the high discount. No doubt the Biota board have costed five year development plans and likely cash flows, so they'd be in the best position to determine whether there is excess cash for a buy back. Individual investors could make a rough guess at CFs to see for themselves whether a buy back makes sense.
If Biota board think BTA is worth $2, then all other investments, including pipeline, should be weighed against that return. All appropriately discounted of course.
If little of the above makes sense, I'm not surprised as it was a speed brain dump as a distraction to study. Though I hope it was of value to someone.
Over and out.
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