July 2, 2012

$100M Mixed-Securities Shelf (update)

After filing a $100MM mixed-securities shelf (i.e., common and preferred stock), Provectus now has a total of $200MM in shelf filings:
A practicality: Given today's filing, it's possible management may cancel the other two shelfs. The goal of the today's shelf was to have a preferred security [easily] available for sale; however, the structure, easily replaces common stock features of the prior shelfs.

One fact: 3.4MM preferred shares are outstanding out of an authorized amount of 25MM; thus, some 21.6MM remain available for issuance.

A reminder: Issuing a dollar-based shelf, rather than a number of securities-based one, means eventual dilution is market capitalization-based and, thus, calculated.

In the company's March 2010 private placement, Provectus issued 8% convertible preferred stock to a number of institutional investors. At the time, aside from raising money to fund operations, it appeared management's strategy was to bring institutional names into the stock and provide these investors with a security (preferred stock) that would have and hopefully further induce a longer-term holding period than issuing common stock.

The mixed-security shelf, by virtue of the preferred stock component, provides a mechanism for a strategic minority investment by Big Pharma. Although it is possible such stock could be issued to institutional investors, a strategic investment is more likely given where Provectus and PV-10's clinical, business and regulatory value propositions currently and future propositions are.

With the involvement of a strategic (e.g., a corporate investor like PFE or JNJ or "insert name") in a shelf issuance, the mechanism and features of preferred stock can facilitate a transaction in ways common stock cannot to the benefit of both buyer and issuer; such as, to provide the necessary structure and rationale [for the buyer] to support a premium to [the seller's] share price.

For example, PFE, a possible strategic given, among other things, Dr. Eagle's presence on Provectus' corporate advisory board), or another big pharmaceutical company could buy 4 to 5 million shares (maybe a lower amount) at $5 per share (maybe at lower price, too).

I'll address (speculate) what a strategic investment does to the perception, options and outcomes for the company in a subsequent post.

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