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Biotech / Medical : XOMA. Bull or Bear?

XOMA 25.33

-1.9%

3:59 PM EST

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To: Dan O who wrote (6726)	7/19/1998 7:06:00 PM
From: aknahow	Read Replies (2) of 17367

Dan, these filings relate to the recent c.v.p. issue of $12.5 million. One is for the press release and the other gives details of the agreement between the parties. As far as I could tell it does not explain the limitations on sale of stock by the buyers of the pfd. This pisses me off because it is one of the more important details from the point of view of shareholders. I have notified Martin of my disappointment in this area of disclosure. It is a fact of life that biotechs need to raise money until they can start selling products and even then they need to be profitable. In a technical sense it's not dilution in that existing shareholders book value is increased as new buyers put in more cash than the the current book value. Not really a consolation since none of us want more shares outstanding. With the proper safeguards and when done in amounts that are small relative to existing outstanding shares the non fixed priced c.v.p. financing represents one viable option. I believe it is used because it is less costly than doing a public offering which requires full registration with the S.E.C. and probably with some of the states that still have departments requiring prior registration of any securities to be offered for sale in their states. This may be a thing of the past. At any rate the buyer of the c.v.p. is not buying as an investor but rather as a future distributor of the stock. Even so should the stock go up before the conversion and sale occurs they would benefit so they have an interest in seeing the stock rise. Without restrictions on sales they could also try to beat the price down, get more shares on conversion and then sell after the price bounced back up. In any case even at the low they would get $12.5 million dollars worth of shares. If the stock remains near $5 they will get about 2.5 million shares. If it went to $3 they would get 8.33 million shares. The question is are there enough safeguards to keep the buyers C.S. First Boston from attempting to manipulate a decline? Probably the threat of a lawsuit is enough once the contract limits such activities.

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