Dec. 17 - Dec. 24: VIMRx Renegotiates Terms Of Deal With Aries Funds; "Average
Trading Price" Clause Replaced By $3 Million Cash + Flat 3 Million VMRX Shares In
Exchange For 9.5 Million Innovir Shares
Dec. 17 - To Present: After 11 Week Decline, VIMRx Shares Begin Upward Trend*
*This may be considered a coincidence by some people, but I happen to believe that
sometime during the week of Dec. 16 the new terms that were negotiated removed any
incentive to further depress the VIMRx shareprice. In fact, under the new terms, the
only incentive would be to see a rise in the share price...and, like majic, that's exactly
what began to happen on December 17.
Dec. 24: Innovir Files 10-k With SEC Detailing Terms Of Revised Agreement With
VIMRx/Aries Funds; VIMRx Controls 74% Of Innovir Laboratories
Jan. 2, 1997: VIMRx Announces Acquisition Of Innovir*
*the Jan. 2 VIMRx press release quotes Dunning as follows: "We worked with the
Aries Funds to modify the terms because, with VIMRx stock trading downward [I
wonder why?] for most of the past several weeks , we felt the dilutive
impact of the transaction on VIMRx shareholders would be too great [did it ever occur
to anyone that, when you give a financial institution an incentive to depress a stock,
that's exactly what often happens?] so we substituted cash for part of the VIMRx stock
that otherwise would have been issued [translation: in order to prevent a relatively minor
dilution of VIMRx stock--a few million additional shares--we gave the Aries Funds the
$3 million that they needed to exercise warrants and options for 6 million INVR shares ,
5.5 million of which they promptly turned over to us along with the 4 million shares they
already owned. Hello?]
There you have it. A reasonably accurate chronology of the Innovir/Vimrx deal. Now,
it's time to take out the calculators for a quick review of how the Aries Funds turned a
"killing" into a veritable "windfall" that all of us should wish for in our lifetime...let alone in
three months!
For starters, remember that the 9.5 million Innovir shares owned by the Aries Funds
cost them .50/share for a total cash investment of $4,750,000. In the first version of the
deal, the Aries Funds were to sell those 9.5 million INVR shares for $12.350 million
worth of VIMRx stock. That is a profit of about $7.6 million on a $4.75 million
investment....or160%!!! Of course, the Aries Funds took a risk in August when they
committed $5 million to Innovir. After all, how were they to know that l'il ole VIMRx
would come along a few weeks later and pay them $12+ million? Talk about good
timing....these guys at the Aries Funds must be geniuses!! Either that or.....
Now let's look at the second version of the deal that was supposed to protect the
interests of l'il ole shareholders like us. Remember, it cost Aries $4.75 million to acquire
or control those 9.5 million Innovir shares. In other words, their out-of-pocket expense
for those shares was, for all practical purposes, $4.75 million. Now, when VIMRx gave
the Aries Funds $3 million cash, that payment reduced the Aries Funds out-of-pocket
expense for 9.5 million INVR shares to a mere $1.75 million. As part of the deal, the
Aries Funds received a flat 3 million VMRX shares. On December 24, for example,
those 3 million shares were worth $8.81 million. So, as of Dec. 24, the Aries Funds had
an unrealized gain of about $7 million on what became a defacto investment of $1.75
million...that's a 400% profit. If you use Friday's closing price, those 3 million VIMRx
shares are worth $10.312 million....or a whopping 589% profit on their intitial
investment of $1.75 million...and that's just in the space of a few months!!!
Now, some of us (myself excluded) may be asking ourselves what prompted the Aries
Funds to take a controlling interest in Innovir in August?
(cont.) |
