re: assets of chemeq, page-6

re: assets of chemeq Everything hinges on the company being able to demonstrate that there is a market by getting sales.

At the moment, the company is worth the worst case value, ie. -$55mil

If they can get the sales and prove the market that they have been promising for the past 7+ years, then noboby would be considering liquidation, so the best case scenario is unlikely to develop. If they were getting the sales they promised, people would be happy to tip in more money through issuing more shares until the dollars from the sales started rolling in.

So in the best case scenario, instead of liquidation value of the assets you would have to consider the present value of future cash flows, and the PE ratio that the market would place on those. These factors would then vary by things such as time remaining until expiry of the patents, potential for further growth by taking a greater share of the market, government regulation, competing products, and other normal market risks. How all of these would wash up in reality is anyone's guess. And of course all that would have to be discounted by the diluting effect of any future capital raisings and bondholders converting their bonds.

So there is a range of valuations from $0 to maybe $10+ before dilution

The current price reflects the markets assessment of the probability of their success. Given that it is closer to $0 and falling, it appears that the market believes the company is heading towards failure and the net assets being worth -$55mil.

So make your own judgement about this! Personally I wouldn't touch it with a bargepole at the moment. I'd wait until there were signs that it can be successful (getting some solid sales would be a good start) and for the price to start rising. Sure that means you won't get the lowest price and as many shares as you could now, but it considerably reduces the risk that you will lose all your money