October 29, 2012

$PVCT.OB: Did Some Shareholders Sabotage the $PVCTP "IPO," and Other Stories Stranger Than Fiction

As the events of the week of October 15 fade into memory, do we know more than less?

Peter's sense of value. I was gratified to confirm Peter's valuation expectations during his discussions with prospective financial leads investors like Aisling Capital and OrbiMed Advisors. You will recall I blogged about my thoughts about PVCTP "IPO" terms on September 23rd. I characterize them as "my thoughts," but I think of them as what Peter may have thought/did think at the time. My expectation of the PVCTP share price was too high (he was at $4, while I thought $5-6). I met expectations with the conversion ratio (he was at 1-to-1, and I thought the same) and the warrant coverage range of 40-60%. These parameters suggest a pre-money valuation of $614MM (using a fully diluted share base of 152MM as at June 30) vs. a $96MM pre-money figure using Friday's $0.63 common stock closing price.

Are we clear? Yes sir. Are we clear? Crystal. Peter was clear as crystal about his pricing expectations for the PVCTP "IPO," were he to utilize it for Provectus. That one other person with whom I interacted during that period of time had a good handle on this suggested Peter kept his cards very close to his vest about his discussions with prospective lead investors (other than to repeatedly say he would not do a bad or dumb deal) and angered or frustrated shareholders who could not or did not successfully read or believe him.

Greedy or sabotage? Did certain shareholders try to sink the PVCTP "IPO" purposefully or inadvertently? Earlier this year I wrote a blog post where I calculated (very roughly) Provectus' pre-money valuation before several investment rounds it consummated with institutional and accredited investors, going back several years. My intent was to highlight how I thought management approached fund raising, which was to raise the amount of money they needed for various reasons and ensure there was some cushion of cash available, and no more. The PVCTP "IPO" was, in my view, a much more of a formal raise, where the process of fund raising was as visible and awareness generating as the ticker symbol was to have been. There is no doubt Maxim Group made mistakes and Network 1's Keith Testaverde did Provectus no favor with his e-mail, but did certain shareholders actively push down the stock either to get a more favorable deal (thinking Peter indeed would do a dumb or bad "IPO") or simply kill the vehicle to which they were vehemently opposed for philosophical (?) reasons?

Value is as value does. I think I learned my/a lesson about trying to have a constructive e-mail dialogue with angry longtime Provectus shareholders. Next time, I won't give out my first name. I jest, and I digress. One such shareholder (angry, "long suffering" and, in my view, intellectually inconsistent) thought I must have been smoking something green, white or otherwise pharmaceutical if Provectus would be sold for $50-60 per share. I draw inspiration and cogency from a large shareholder who frames his view on valuation this way (paraphrasing):
  • If I am dead wrong about PV-10 (i.e., it is "only" a loco-regional treatment), the stock is worth $5.
  • If I am wrong (i.e., it's got systemic treatment "potential"), the stock is worth $10.
  • If I am right (i.e., it is a systemic treatment), well then...
While $50-60 per share is the price for which Craig would sell the company, I think he is a pragmatic individual about valuation. He does not strike me as idealogical about this topic. I am sure he, together with Provectus' board of directors and well-heeled financial advisers (Bank of America/Merrill Lynch, not Network 1), will evaluate bids from Big Pharma companies and make the right decision for shareholders and management.

At the same time, the man understands what he has created. And day by day, the world of Big Pharma is catching on to it.

In my head exist many different kinds of trading and investing personalities, because different situations demand different approaches. Those personalities need data and information to inform their decisions. I cannot say with conviction, yet, what I think Provectus is truly worth and for what others would pay. I need more information. I am, however, guided by management's views on the topic, which are informed by others.

I will know what Provectus is worth when I see it; that is, the valuation that reflects what it is worth. 

The momentum trader in my head is whistling "Rocket Man" now.

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