September 9, 2012

Blog Reader Question About $PVCT.OB

The company didn't list "raising money" in the public market in any news release. They said possible dermatology deal or strategic investment. If this preferred is for the latter then why list it? How can we have a listed security if there is only 1 owner. I think you have to have 300 investors for a security to list on the NASDAQ. If that is the case then some of the details of this could be much less important. What are your thoughts?
Yes, the preferred stock offering (the "Offering" or PVCTP) must have at least 300 round lot shareholders to list on the NASDAQ, so there will be multiple initial owners of the Offering if and when it is utilized.

The NASDAQ requires an underwriter for a stock exchange listing, like Maxim. Any investment bank could be brought on as a co-underwriter ("co-manager") alongside or a secondary underwriter below Maxim.

I think the Offering facility is important for several reasons, and refer to it as a facility to mean a tool that can be used, as opposed to a live offering.

The PVCTP filing is a preliminary, placeholder document that does not specify the conversion ratio (i.e., the number of shares of common stock into which one share of preferred stock converts) or prospective warrant coverage, which help ascertain the valuation at which the deal will be done and the dilution that would ensue. Management, with feedback from Maxim and based on the interactions with and feedback from corporate and/or financial investors who subscribe to the deal, will set the conversion ratio. Maxim called prospective financial investors about the Offering at least beginning this past Thursday to gauge indications of interest to buy preferred stock.

As I wrote at the outset of this blog post, there is no certainty Provectus ultimately utilizes the Offering. It is an optional strategy. Being on NASDAQ enables much more visibility and awareness of the stock and company, an obvious observation on my part that refers both to PVCT.OB, when it trades on the major stock exchange, and PVCTP.

PVCTP is one of several plays that could be run. Some of these plays could be run standalone, and others in some kind of chronological order:
A. The SPA and/or more Moffitt data may be sufficient to propel the common stock to the NASDAQ. PVCT.OB requires 5 consecutive days above $2 to move to the major stock exchange. 
B.  The Offering could be used to "up list" the common stock onto the NASDAQ. PVCT.OB would trade higher (i.e., over $2 per share) if PVCTP were sold for $4 per share or higher with a favorable [to the company and existing shareholders] preferred stock conversion ratio. Perhaps the SPA and/or Moffitt PRs were insufficient to move the common stock as high as though, hoped for or needed. Life sciences investors who then would feel comfortable coming off the sidelines could buy a NASDAQ listed security. PVCTP then "drags" PVCT.OB onto the NASDAQ. 
C.  The Offering could be used to turbo charge the common stock once PVCT.OB trades on the NASDAQ. Management could offer PVCTP after the common stock lists on the NASDAQ. Buyers of the preferred stock likely would include life sciences investors, where the preferred stock conversion ratio probably is more favorable for the company than in B.
One of several securities could be sold to a Big Pharma company as part of a strategic equity strategy or program:
  • Common stock, likely when PVCT.OB trades on the NASDAQ. Like with J&J's JJDC deal with Genmab, there will be a premium to the then current common stock share price. J&J paid a 30% premium. The transaction price, however, will be anchored ultimately by where the common stock is trading. Duh!: The higher the common stock, the higher the transaction price;
  • A non-listed preferred stock security that either exists today or will be constructed; and
  • PVCTP. Since 300 round lot holders are required, any use of the Offering for a Big Pharma company or its development corporation also would include financial investors.
Do not dismiss the corporate governance and compliance housekeeping stamp of approval the NASDAQ provided Provectus by its PVCTP listing approval. The process management undertook to complete NASDAQ's process was non-trivial, and takes corporate governance (and all related matters) off the due diligence checklist for serious life sciences (and other institutional) investors.

No comments:

Post a Comment