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Biotech / Medical : Biotech Valuation
CRSP 56.68-2.4%Dec 12 9:30 AM EST
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To: IRWIN JAMES FRANKEL who wrote (28108)9/24/2008 12:17:45 PM
From: Biomaven2 Recommendations  Read Replies (2) of 52153
 
My idea is that the "make up" amount only be determined when it is actually known. In other words, it is payable in contingently issuable shares based on how much the government actually loses in the deal. The hard question is whether you use today's stock price or the stock price when it is paid to determine how many shares to issue. I would argue for today's price, as that reduces the uncertainty and prevents a "toxic convertible" situation.

If you do it my way, companies might well be conservative in deciding what and how much to offload - that's fine by me.

The key point is that it to some extent finesses the valuation question. In your example if the government paid the HMV and that was what was actually realized (with some adjustment for present value), then there would be no equity paid out at all.

Peter
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