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TOPIC: Scratching my head on LPC deal

Scratching my head on LPC deal 05 Jan 2017 10:40 #8411

  • holger
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I am a very long-term investor in cytx and annoyed as most of all other investors of the company and its management. Usually I do not post in message boards, but following them since the old w:o times. The recent agreement with LPC makes me scratching my head to a degree that I would like to share some of my thoughts/questions.
The recent filing (S-1) states the number of new shares for LPC with around 6.5 million, this represents 30% of current outstanding shares. How goes this in line with the limitation of LPC to hold maximum 9.99% of all shares?
Even considering that LPC will not be forced to buy all new stocks at once, this will not solve the problem. Additionally, to reach the 20m USD at current price levels, the need to issue more than 10 million new shares instead of the 6.5.
While this dilemma is already touched in the filing, I struggle how to interpret it, as simple massive dilution or assumed rise in share price by the management. Who is going to absorb additional stocks when cytx needs to call more money from LPC while touching the 9.99 limit in holding?
LPC already received 127,419 shares as compensation free for entering the agreement. Up to 382,258 can follow in course of the funding progress. Assuming an average price of around 2$, this means one million remuneration for a 20m deal, not bad imho.

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Scratching my head on LPC deal 05 Jan 2017 11:01 #8412

  • myownhedgefund
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Hello holger...welcome as a new "posting" board member.

If you have been reading here then you must have come across the post saying exactly what you stated in your questions.
1. LPC will have to sell shares to absorb more for CYTX funding.
2. Hedrick has stated they are working on some additional small deals....maybe that provides a small amount of capital....maybe that allows price rise and better funding levels. You should know our history on such events, but who knows. I guess the best comfort is what was LPC told to get them to sign the deal ? I don't think it was for a few free shares. Key is getting to scleroderma data mid 2017.
3. Maybe it works out well, maybe not.

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Scratching my head on LPC deal 05 Jan 2017 12:49 #8414

  • rodney.strongg
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Holger,

1) Not sure why 6.5 million shares are being registered - way too many for the deal with LP (at least, lets hope so). I will find out the reason.

2) I estimate that LP can only hold about 2.3 million shares without going over the 9.99% - that would include what they owned before the agreement (206,084), the amount received on the signing (127,419), and the potential amount to be issued upon execution (382,258) - of course they can sell shares at any time to stay under the 9.99%

3) My guess is that CYTX plans to see prices much higher than we have today!

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Scratching my head on LPC deal 05 Jan 2017 13:49 #8416

  • holger
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Thanks for your replies, HF and rodney

I view the 6.5 million shares as minimum number. One simply cant reach the 20 million, at least at current price Levels. As already discussed there will be a more or less continous turnover of new stocks. Dividing 20 million $ by 6.5 million shares means an average price of over 3$. Still nearly 100% from now...

However, my conclusion for the moment is that there is no hurry to average down own holdings.

I agree that the deal will take us to the scleroderma data, from there it will be a new game.

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Scratching my head on LPC deal 05 Jan 2017 14:32 #8417

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Holger, not sure if you realize that there should not be a need for cash until the latter part of Q-2 - assuming that we complete a partnership(s) before such date, then such date gets pushed back even further (if needed at all) and should be at SP's significantly higher than where we are today.

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Scratching my head on LPC deal 06 Jan 2017 05:28 #8420

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Holger, the reason for the 6.5 million share authorization was a "worse case" basis", namely that there would be a need to raise as much as $20 million, but never expecting less than at least $3 per share.

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Scratching my head on LPC deal 06 Jan 2017 13:00 #8432

  • holger
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Thanks rodney, makes sense overall. But you never know, when there is a chance to 'burn' cash...

Lets see, I surely will increase my position some time during the first half 2017. It is simply too cheap ;-)

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