AVR - Anteris Technologies

[skc]

IMO there is only limited possible logical conclusions to draw when money is raised via a placement rather then a renounceable rights issue.

Other possibilities:

They were approached by new investor looking for a meaningful stake. Rights issue only allow existing investors to participate, and you never know about the liquidity / volume of renounceable rights trading.

They want money to come in before announcement of major news. E.g. A scheduled research report / milestone of which the outcome is genuinely unknown. Management wants to raise fund as a risk management measure, just in case the news turn out to be negative. Or a more sinister view: management is aware of a high possibility of bad outcome, so wants to raise money prior to a share price fall. (Note: just listing the possibilities, not implying anything one way or another).

 

[DeepState]

Financing History:

Refer Changes in Capital Stock line item in the historical cash flow statements:



Fund raising in an annual event for these guys. The $8m is small relative to 2013 raising. They had $2m on balance sheet as at 30 June 2013 and generally maintain that sort of level. They have no debt worth talking of. 2013 EBITDA (prior to special items) was around $8m.

This doesn't look like anything other than a financing requirement, as advertised, to me. The insto/sophisticated placement is often preferred because it is fast and cheap for relatively small raisings - as this one was. It just happens in an (early) evening. In terms of 'unfairness' you can now buy in at the same price as the placement, if you manage to get queue priority at some stage.

If I was a retail holder, I'd be pissed that they did not do the raising shortly after the US FDA approval and dilution would have been slightly more than half of what it has been.

 

[grumstar]

Financing History:

Refer Changes in Capital Stock line item in the historical cash flow statements:

View attachment 57962

Fund raising in an annual event for these guys. The $8m is small relative to 2013 raising. They had $2m on balance sheet as at 30 June 2013 and generally maintain that sort of level. They have no debt worth talking of. 2013 EBITDA (prior to special items) was around $8m.

This doesn't look like anything other than a financing requirement, as advertised, to me. The insto/sophisticated placement is often preferred because it is fast and cheap for relatively small raisings - as this one was. It just happens in an (early) evening. In terms of 'unfairness' you can now buy in at the same price as the placement, if you manage to get queue priority at some stage.

If I was a retail holder, I'd be pissed that they did not do the raising shortly after the US FDA approval and dilution would have been slightly more than half of what it has been.

Ok Now you have really confused me Ive been reading your posts and im a holder in AHZ only because I liked what they where doing and am relativly new to the share market. So if share price drops lower than ..10 I can buy more shares lower than the spp prise?

 

[DeepState]

Ok Now you have really confused me Ive been reading your posts and im a holder in AHZ only because I liked what they where doing and am relativly new to the share market. So if share price drops lower than ..10 I can buy more shares lower than the spp prise?

You weren't confused after all. The SPP price will be at $0.10 which is in line with the insto/sophist placement. So, given the current price is $0.10, you can get set at the same price as the SPP. If it falls below that, the SPP will likely not be successful unless the punters who want more of the stock think they can't get set at the lower price due to lack of supply relative to demand. It will likely close undersubscribed in that event.

 

[galumay]

Fund raising in an annual event for these guys. The $8m is small relative to 2013 raising. They had $2m on balance sheet as at 30 June 2013 and generally maintain that sort of level. They have no debt worth talking of. 2013 EBITDA (prior to special items) was around $8m.

Thats true, I think it was just the way it was done this time that drew our attention! (long term holders I mean.)

This doesn't look like anything other than a financing requirement, as advertised, to me. The insto/sophisticated placement is often preferred because it is fast and cheap for relatively small raisings - as this one was. It just happens in an (early) evening. In terms of 'unfairness' you can now buy in at the same price as the placement, if you manage to get queue priority at some stage.

Thats certainly one possibility, and I am a believer in Occam's razor.

I dont think its likely that there will be any opportunity to buy in at below 10c, so if we current investors want more stock it will be better to just jump on the SPP. The flippers that did buy in the private placement have long gone, support is very strong at the 10c mark.

If I was a retail holder, I'd be pissed that they did not do the raising shortly after the US FDA approval and dilution would have been slightly more than half of what it has been.

That's based on an assumption that the sp for a placement then would have been successful at a higher price than 10c I presume?

 

[DeepState]

1. Thats true, I think it was just the way it was done this time that drew our attention! (long term holders I mean.)


2. I dont think its likely that there will be any opportunity to buy in at below 10c, so if we current investors want more stock it will be better to just jump on the SPP. The flippers that did buy in the private placement have long gone, support is very strong at the 10c mark.

3. That's based on an assumption that the sp for a placement then would have been successful at a higher price than 10c I presume?

1. The private placement to insto and sophist is standard process for this firm and how small fund raising takes place more generally. AHZ raised capital in this way in Dec 2012, for instance. It's totally standard and this is how it happens. If you looked at the cash drain, it should not have surprised anyone that a capital issue would need to be made, only the amount would be in question. They are in cash drain and cannot sustain themselves without periodic fund raising. They are not in a position to raise debt and have not done so.

2. If you feel that it won't fall below 0.10, then participation in the SPP will make sense. But, you are limited in the bid amount and may be scaled back. If you want volume, you should get in the queue. you can always decide to not participate in the SPP if you get volume at $0.10. With volume of maybe 5-8m that will likely go today, you will be close to front or through the front of the bid queue. I'm not exactly sure how you conclude there is solid support at $0.10. Retail may be encouraged to keep a floor on $0.10 which is the SPP price, but then again, they'd be even better off if the price slid to $0.09, so they will not be strong support during a flip period. It had solid support in the placement, it had solid support at $0.107. That solid support moved back about 5% in a day despite large imbalance to the long side. If you think the flippers have gone....well, we'll have to see. I have no idea how you develop a conclusion like that. Volume is insufficient to have cleared them out and price action suggests the complete opposite. Not all of the placement takers will flip, but it will be more than 20% of shares placed and not all that volume is flipping.

I'll leave it to you to figure out what is fair for this company. You can like the story, and every company has a story, but at what price?

3. The placement would have been successful at a higher price as participants would seek to avoid dilution. If they offered a 20% discount to current, it would also have been vastly oversubscribed. Issuing at this at a higher price than is prevailing now would not impact the outcome. Given the funds required, though, it would have led to less dilution for retail. Management did a disfavor to retail by doing this. They would have been in the best position to know what the company was worth, in concert with their ECM advisors. Without further material developments, the share price tanked. They would have known of their cash requirements well in advance.

 

[craft]

Interesting commentary, as always, craft. So which one do you believe is the motivation in this case? Or have you no real interest in AHZ and just passing commentary on the possible reasons?

Hi Galumay

No real interest in AHZ – just passing comment on the placement. Not sure which one is the case but there really is no good reason for a placement in my book. A ‘right’ of share ownership should be first offer to add more capital. If you are not extended that right it effects what valuation you should place on future growth expectations.

Other possibilities:

They were approached by new investor looking for a meaningful stake. Rights issue only allow existing investors to participate, and you never know about the liquidity / volume of renounceable rights trading.

Particularly distasteful use of a placement - The market is there to exchange ownership at negotiated prices. New investors should have to deal with current owners to establish positions not management - very rarely would it make sense for management working in the best interest of shareholders to make placements to new investors unless that investor was bringing something more then just passive ownership to the table.

They want money to come in before announcement of major news. E.g. A scheduled research report / milestone of which the outcome is genuinely unknown. Management wants to raise fund as a risk management measure, just in case the news turn out to be negative. Or a more sinister view: management is aware of a high possibility of bad outcome, so wants to raise money prior to a share price fall. (Note: just listing the possibilities, not implying anything one way or another).

I have no issue with management managing liquidity in light of risks but it should be done in a timely enough fashion to not 'require' a placement and owners should have the first right to add capital in light of risk reward considerations.

 

[Ves]

Hi Galumay

No real interest in AHZ – just passing comment on the placement. Not sure which one is the case but there really is no good reason for a placement in my book. A ‘right’ of share ownership should be first offer to add more capital. If you are not extended that right it effects what valuation you should place on future growth expectations.

Hi craft,

I know you feel strongly about share placements and any other form of capital injection that involuntarily dilutes some of the holders on the register, so I was wondering if it is generally a big enough red flag for you to sell? Would you need a really good reason to keep holding? Or is it just a matter of updating your valuation to reflect the effects of the dilution (and any possible further dilutions in the future if management have a track record - which I assume you would check before taking a position).

 

[craft]

In terms of 'unfairness' you can now buy in at the same price as the placement, if you manage to get queue priority at some stage.

The subsequent market price has no bearing on the damage done to the existing share holders value by the placement - (I can't quantify what the damage is because I can't estimate a value for the company - but many here seem very enthusiastic about the company and the fact remains that unless the shares were overvalued at 10 cents there must be damage to the value of existing holder positions)

It is the discord between the enthusiasm on this thread and my dislike for managements use of a placement that caught my attention. Whilst if you could quantify the damage from the placement it wouldn't be huge on this one occasion - more worrying is what its use says about management. If I only had one avenue for evaluating management it would be on how they transact in the company's shares.

 

[craft]

Hi craft,

I know you feel strongly about share placements and any other form of capital injection that involuntarily dilutes some of the holders on the register, so I was wondering if it is generally a big enough red flag for you to sell? Would you need a really good reason to keep holding? Or is it just a matter of updating your valuation to reflect the effects of the dilution (and any possible further dilutions in the future if management have a track record - which I assume you would check before taking a position).

We crossed - the last paragraph of the previous post sort of gives an answer to this - Important but not absolute, as always it depends on the overall story.

 

[galumay]

1. ....stuff.....

Thanks DeepState for the detailed response, thought provoking information.

 

[Ves]

We crossed - the last paragraph of the previous post sort of gives an answer to this - Important but not absolute, as always it depends on the overall story.

Thanks, got it. I'm fairly similar actually - but do it more than once and there would have to be a bloody good reason.

 

[grumstar]

You weren't confused after all. The SPP price will be at $0.10 which is in line with the insto/sophist placement. So, given the current price is $0.10, you can get set at the same price as the SPP. If it falls below that, the SPP will likely not be successful unless the punters who want more of the stock think they can't get set at the lower price due to lack of supply relative to demand. It will likely close undersubscribed in that event.

Can You please try and explain to me why people would want to sell for less than .10 that i dont understand!

 

[galumay]

Can You please try and explain to me why people would want to sell for less than .10 that i dont understand!

I will have a crack, simplest reason would be that they bought at some time in the past for a lot less than 10c, and want to free up the capital for some reason.

 

[DeepState]

Can You please try and explain to me why people would want to sell for less than .10 that i dont understand!

There are a ton of reasons. Here are some off the top of my head:

1. Investors change their minds about the prospects of the company and decide it is worth 9c. The valuation ranges for a company like this would be as much as 50% of the current stock price. Within that range, anything is fair game. If the people think it is worth 15c great, it's worth 15c and no valuation method would really dispute it too heavily. Just as easily it can go to 9c and there is little to say that this figure is wrong. The market just swings on instinct and herd behavior. No news is required at all.

2. There are a ton of stops and limits at 10c. If selling pressure pushes it through 10c, longs get squeezed out and liquidate. This pushes the price down suddenly.

3. Investors are sitting there knowing that only 30% of Placement volume has gone through as of tonight. Likely there will be patient money which are flippers that will take their time, they will cap out somewhere in the 11c to 12c range for instance. This will cap the stock performance for quite a while. It could be months as volume will decline again in the next week back to background noise levels. These flippers will not dominate volume as they currently are. They don't need to in order to control the price. Such investors may have more compelling ideas elsewhere and just need the money to be redeployed, so they sell.

4. Investors see the liquidation of some portion of their Placement as a whole trade which is tranched up for sale. Buy flip move on. Some of those tranches could easily be under water but no-one cares. For most people, this is a total piss ant.

On and on it goes....

 

[grumstar]

There are a ton of reasons. Here are some off the top of my head:

1. Investors change their minds about the prospects of the company and decide it is worth 9c. The valuation ranges for a company like this would be as much as 50% of the current stock price. Within that range, anything is fair game. If the people think it is worth 15c great, it's worth 15c and no valuation method would really dispute it too heavily. Just as easily it can go to 9c and there is little to say that this figure is wrong. The market just swings on instinct and herd behavior. No news is required at all.

2. There are a ton of stops and limits at 10c. If selling pressure pushes it through 10c, longs get squeezed out and liquidate. This pushes the price down suddenly.

3. Investors are sitting there knowing that only 30% of Placement volume has gone through as of tonight. Likely there will be patient money which are flippers that will take their time, they will cap out somewhere in the 11c to 12c range for instance. This will cap the stock performance for quite a while. It could be months as volume will decline again in the next week back to background noise levels. These flippers will not dominate volume as they currently are. They don't need to in order to control the price. Such investors may have more compelling ideas elsewhere and just need the money to be redeployed, so they sell.

4. Investors see the liquidation of some portion of their Placement as a whole trade which is tranched up for sale. Buy flip move on. Some of those tranches could easily be under water but no-one cares. For most people, this is a total piss ant.

On and on it goes....

Thanks peoples for your explainations. I can know see that theres heaps of reasonds and there is a hell of a lot more reading and learning I need to do.
Hope it doesnt go down much more or I would have done the mortal sin of potting all my eggs in on basket and I do know thats a no no>

 

[galumay]

Thanks peoples for your explainations. I can know see that theres heaps of reasonds and there is a hell of a lot more reading and learning I need to do.
Hope it doesnt go down much more or I would have done the mortal sin of potting all my eggs in on basket and I do know thats a no no>

AHZ is not the type of share to use for 'putting all your eggs in one basket", its a speculative stock, basically has no earnings yet, and is impossible to calculate any intrinsic value.

I am a big fan of AHZ, but they form a tiny part of my overall portfolio because buying AHZ is like putting your money on the roulette wheel at the casino.

Even if you get lucky with AHZ, if you continue to gamble in the share market you WILL lose your shirt sooner or later.

 

[VSntchr]

(AHZ) is impossible to calculate any intrinsic value.

I'd argue that it is not impossible to calculate any intrinsic value.

I think that any business that operates and can be modelled with realistic assumptions based on relevant industry comparisons can be valued and the fact that it is not yet producing free cash flows, or at the more basic sense - earnings - merely increases the level of uncertainty and hence contributes to the larger range of valuation that RY has referred to above.

FWIW, I have followed this company since quite early on and have it valued based on my assumptions of sales and margins going forward. I am under no illusion that these assumptions WILL BE WRONG, but they are my best educated guesses and over the last 12 months I have only altered them slightly as my understanding has improved. I had a good laugh when I read the assumptions of one of the broker's covering this stock, you have to ask - are they advertising or researching!?

From the time that I purchased, to the time the SP was 18c, to now...my valuation had moved around from 8c - 12c. While that may seem like a big swing..it is far less than what the SP has done...(2c to 18c).

 

[galumay]

I'd argue that it is not impossible to calculate any intrinsic value.

Ok, I will concede its not impossible, but I would have such low confidence in any such prediction given the assumptions required and the absence of any earnings history, as to give me no confidence to justify holding a share such as AHZ.

My view is speculative shares like AHZ are pure gambling, and I only commit funds that I dont mind losing (would still prefer not to!).

 

[Tyler Durden]

Ok this dipped below 10c.

Now I'm worried