Trade Halt on Fri 16.10.2020 for capital raising is certainly...

Trade Halt on Fri 16.10.2020 for capital raising is certainly one from the left field!

Negatives of the CR:

• The new shares would be at a discounted. Last CR was in Oct-2019 when SP was at 7c, and new shares were issued at 5.5c. That's a discount of 11.43%. At the same rate, with last peak at 20.5c less discount, new shares could be issued at 16c.
• Last time the entitlement was 1 to 5 offered which represents a dilution of 16.67%. If the same this time, the true value of the share could be further devalued by 16.67% to 13.5c.
• Arbitrage would occur whereby people would sell some or all of their shares at any price higher than the new issue price, say 16.5-17.5c, in the hope that when the new shares are traded on the market, they could buy them back at 16c or below because of the dilution. Another reason is to raise cash to pay for their entitlement if they don't have any spare funding. From history, the 5.5c CR last time had seen a further devaluation of 10% to a low of 5c. If this hold true, we could see a bottom of 14.5c However, PYC is in a commanding position this time and any dip would be bought with confidence.

Positives of the CR:

• With PYC applying their successful CPP platform technology for 6 additional drugs on top of VP-001, much needed working capital would be required and a CR is inevitable. Remember each US$1b of annual sales would translate to 49c income PER SHARE PER YEAR. 7 drugs would roughly bring in $3.29 of value per share annually. Therefore this CR is well worth the short term pain for a long term gain.
• If the entitlement is 1 for 5 offered, capital raised at 16c per share would be $93M, sufficient for 6 more drugs to run to FDA approval.
• As mention by Rohan in the Investor Call, a number of US Banks and funds are interested in PYC. Using a CR could be the best way to bring them on board without distorting the SP due to hugh on-market buying.
• Once the US Banks are onboard, PYC's profile in the US would be lifted, gaining more traction for the SP to keep going North.
• Even if SP goes down to 13.5c and bounces up, the uptrend channel is still intact! With possible FDA approval of ODD and successful Rabbit Tox coming, SP could recover very quickly and all this fuss could well be a small blip on its way to a very profitable investment.

These are my TA thoughts, DYOR! If you would like more of these charts and analysis, please click the "Great analysis" button for encouragement.