May 13, 2012

Musings on May 13

For a little while I've been trying to pull together certain necessary pieces in order to purchase a large number of Provectus shares at current prices (current = somewhere in the range of where the share price has been for the last 3 to 6 months).

As part of this process, I called the markets makers on Friday looking for pricing on a 5MM share block. The goal is (was) to ascertain what average price they thought could buy (and ultimately, if engaged, would commit to buying) on my behalf such an amount in what reasonable period of time.

It is (has been) easy and straightforward to accumulate tens and hundreds of thousands of shares at a time in the current market. Sit on the bid at various levels during various times of the day, and you get hit. Occasionally pay the offer (buy shares offered at various prices and times of the day), but not often enough to let the price runaway from you.

Why is price important? My expectation and experience suggested it was nearly or effectively impossible to by 5MM shares -- at current prices, this only is $4-5MM -- without moving the price into the $1.50 to $2.00 range, or higher (set aside for the moment the impact of warrants being exercised at these prices, or going directly to warrant holders and negotiating to buy their warrants).

If I think I will get $25-50 or more per share in the end-game, should I quibble over cost bases of $0.80-$0.95 or $1.50-2.00? Absolutely. My ROI gets cut in half or more. The outcome still is robust and I could acquiesce, but it is hard to give in and so I doubt it: "A George divided against itself cannot stand!"

As I expected, the market makers could not follow through. Perhaps when my query is addressed substantively next week, they may have a different response. But right now, I cannot get such size at an attractive fixed price in a reasonable time frame. One market maker observed there were some willing sellers in the 80s and 90s (cents) but not enough to fill my size. If another potential investor wants to do a similar size (to my desired amount), there's not enough to go around right now.

Why is time important? Time matters now more than ever. I can try to sit around and slowly, very slowly,  accumulate my desired position at my desired price target range ($0.80-$0.95). Or, I can more aggressively act.

But the pipeline of catalysts is backing up, and the clock is ticking on when these catalysts will catalyze the share price. Among them, the usual suspects:
  • The MM Phase 3 SPA;
  • A dermatology term sheet;
  • More Moffitt immunology data;
  • The Munich MM Phase 2 data;
  • Accelerated approval for MM
  • Additions to the board of directors and corporate advisory board;
  • A NASDAQ listing;
  • An HCC Phase 2/3 trial suitable for an SPA;
  • Etc.
Time is not on my side.

An interesting cascade effect. Take a look at the current table of outstanding warrants (not including, of course, those issued in Q1 2012) here: nearly 12MM at exercises prices of $0.95 and $1.00, and about 12.5MM at $1.12, $1.25 and $1.50, all at terms or durations of 2 to 4 years (from December 31, 2011)

As the share price runs over the next weeks, months and quarters from the catalysts in the pipeline through these exercise prices, the company enjoys significant cash infusions for contemplated operations when these warrants are exercised.

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