$PVCT: Now dash away! Dash away! Dash away all!

The mostly institutional, but non-life sciences, participants of Provectus' March 2010 private placement (1Q10) are likely mostly gone. I think nearly 85% of the preferred shares have been converted to date into common stock and sold over time. My assumption is that these folks either held the preferred to enjoy the coupon, or converted them into common share that they sold right away.

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The preferred shares in the placement were issued at $0.75 per share. Most of the 85% -- about 60% of this number -- converted and very likely sold within 3 quarters of the placement. 15% gradually sold as the common stock share price stayed above the issue price (through 2Q12). Another 10%, I think, sold in last quarter (3Q) and are selling thus far this quarter (4Q).

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Some funds took profit very quickly. Others held on to take profit more slowly or in hopes of greater but still faster return. I wonder if some of the recent pressure on the stock has been due to the departure of more of the remaining funds that participated in the placement.

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Blog Reader Question

Will the SPA have any influence on the [share price] at all?

The SPA should have a significant influence on the share price.

The premise is simple. Receive an SPA, and certain life sciences-focused investors will buy stock. This has been the observation of my anecdotal due diligence on this topic,and what I believe is management's own perspective. From Friday's closing price of $0.71 and a market capitalization of, per Google Finance, about $80MM, the SPA, which thus paves the regulatory path for PV-10 to be approved primarily as a local-regional treatment, should spur some life sciences-focused and a good number of generalist professional and retail investors to jump into a stock whose market capitalization they could see as multi-hundreds of millions of dollars (i.e., $2-3 per share).

A positive outcome (i.e., closer to or in excess of $2 per share), however, is not so simple.

First, is supply too much? Weighing down the flight of the share price are:

• The [purported] remaining selling of Dr. Adams' shares. It has been speculated, I think on the Yahoo! Finance Provectus board, that this figure is about 2 million shares.

• Profit taking by some investors. The amount of profit taking will increase as the share price approaches $2. Many retail investors who have been underwater on their holdings for some time very likely will sell if their respective cost bases are exceeded by 20-30%. I guess several million shares will come to market as we near $2; and

• Warrant exercising into common stock that are then sold rather than held: As at 12/31/12, ~12MM at $0.95 and $1.00, ~4MM at $1.12, ~5MM at $1.25 and ~3MM at $1.50. Not taking into account the adjustment for cashless exercises, etc., this is about 25MM shares that would be $0.50 to more than $1 in-the-money as the share price approaches $2.

Second, is demand enough?

• Some life sciences-focused investors may be constrained by fund criteria that prevents the purchase of the stock while it is an over-the-counter stock. After a minimum $2 closing price after 5 days, followed by the transition of the PVCT ticker to the NASDAQ, they should jump in, too.

• Some investors will wait until the share price exceeds $5 before their fund criteria permits then to buy stock; and

• Despite the receipt of the SPA, other life sciences-focused investors will wait for the second release of Moffitt murine study work and/or the first release of Moffitt human study work before they too will buy shares. This also, I believe, is management's perspective.

Is there demand for 20-30MM shares, in the near-term, after the SPA PR is issued? Quite possibly. More demand should come on-line when more Moffitt results are released. Even more demand will materialize as a dermatology deal is done, mini-oncology deals are consummated, and Big Pharma relationship revelations are made.

But the first portion of the share price ascent surely will be tested.