Why have a CR when we have enough cash?, page-49

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Very goodquestion (@markie125 and others) …”Why have a CR when we have enough cash?”

What we know:

- PHjust received his new IMU shares for the Vaxinia acquisition, and being a 12%shareholder of IMU…he will be the biggest loser with any dilution and drop inshareprice due to this cap raise. His new IMU shares (10% out of the 12% isescrowed for 12 months).

- TheIMU Management and Board could have announced a capital raise at the time ofthe CF33 announcement in July 2019 when IMU was trading at 1.5c (and evenlower)…this would have been far more (140%) dilutive then the 3.6c pricetargeted for this cap raise now.

- Last cap raise:

- The$20m capital raise in June 2018 at 2.7c was also offered to retail shareholdersvia a fully underwritten 1 for 9.5 non-renounceable pro rata rights issue toraise approximately $8.1 million (before the exercise of any New Options)…This capraise ended up being a flop with over 50% of the retail offer not taken up and dumpedon the underwriters…resulting in further sp pressure as the underwriters had tooffload/flip these shares to the market.

- Thesp stayed below the 2.7c price from July 2018 to just recently in November2019.

- EGM documents:

- Page47 para 9.8 states that “... a number of parties have approached Vaxiniaregarding its acquisition...”

- Page6 para 12 states “... the value if Vaxinia principally derives from ...sourcingof several funding sources...”

- AGM (8 Nov 2019):

- ChairmanPaul Hopper…

o Team has beenworking very hard on the CF33 OV already, despite the fact it is still subjectto EGM next week;

o Held strategyplanning session with board this week…great contributions from Dr Russell andDr Eckstein at this session [my note: I take this as M&A /partnershipdiscussion contributions from Dr R and Dr E given their past experience in thisarea (my guess only)]

- Leslie’semail to @barker777 on 28 Nov (and I am sure to many others):

- “We have hadsignificant inbound interest from domestic and international institutions overthe last month off the back of the acquisition of the OV program.”

- IMU’s cashposition:

- There was noimmediate need for cash as the cash balance was healthy (circa $19m).

- Listed IMUOA andIMUOB options and all the unlisted options with management and directors were stronglyin the money … potentially raising a further $21.3m over the next 24 months.The exercise of options could have raised approximately the same amount as thiscurrent CR.

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My take/My view: (in my humble opinion only)
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- Similarto 99% of shareholders (who are not insiders) I was very shocked and disappointedwith the trading halt and capital raise announcement and the AFR articlestating the 3.6c price.

- Itoo was kicking myself for being too greedy and not selling out at 5c to 6c.(Like everyone else…my hindsight is a perfect 20:20).

- Iwrote previously (around August/September when the EGM was delayed without anyupdates) that I suspected that a potential deal maybe being investigated at thetime…hence delaying the EGM.

- NowI ask myself…why would PH be willing to dilute his recently acquired (additional10%) stake in IMU with a “low-ball” cap raise at 3.6c? PH is the ultimateinsider and largest shareholder. Yes, PH is motivated by self-interest…however, the good thing in this situation is that his self-interest in IMU is alignedto my self-interest and very positive for the rest of us (i.e. minorityshareholders). Back in June 2018 (at the previous cap raise) PH’s interest inIMU was only a tiny 2-3%, now it is a very healthy 12%.

- Itook up my full entitlements to the June/July 2018 retail cap raise and wasunderwater for 18 months.

- Thereare many disgruntled institutional and retail shareholders from the June/July2018 cap raise and I believe that management is fully aware of this investorsentiment, and could NOT possibly do another opportunistic cap raise if therewas not a COMPELLING STORY and GREAT DEAL to sell the NEW institutional investorstipping money in.

- Iargue that the existing institutional shareholders from the June 2018 cap raiseare still fatigued from that cap raise, since a lot of them were alsounderwriters and were left holding the bag of the very disappointing retail take-up… and therefore I argue that management placed new shares in this current (Nov2019) cap raise to NEW INSTITUTIONAL shareholders who are now excited about IMU’sOV IP.

- PHand Prof Fong would not deliberately swap their pure CF33 OV play/exposure (viaVaxinia Ltd) for more B-cell exposure via IMU shares, if they though that IMU’sB-Cell pipeline was a dud. Why would they let the value of CF33 be dragged downby IMU’s wider pipeline…especially when there were others interested in theVaxinia acquisition.

- IMUnow have the fire power (with PH, LC, Dr Leslie (Director), Dr Eckstein(Director), Prof Fong (OV SAB), Prof Prasad (OV SAB), and the ex-VLA team) tonegotiate a great deal for IMU’s OV IP.

- TheVLA takeover experience will just add to the value, negotiating skills and dealmaking capacity of IMU. I argue that the VLA experience will provide a rock-bottomstarting point for discussing IMU’s OV IP value with any potential suitors.
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We willfind out soon (in next couple of days) … “why have a CR when we have enoughcash?”.