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Biotech / Medical : XOMA. Bull or Bear?
XOMA 25.33-1.9%Dec 17 3:59 PM EST
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To: opalapril who wrote (8532)1/29/1999 9:18:00 AM
From: Biomaven  Read Replies (1) of 17367
 
The common shares will be held in an escrow account until sold by the buyer (up to a maximum of three years). Beginning August 31, 1999, the number of shares remaining in the escrow account may be adjusted at 90-day intervals based on an 11% discount from the prevailing market price at that time. The investors are also receiving five-year warrants to purchase up to 240,000 shares of XOMA common stock at a 60% premium to the current market price.

I'm afraid to say this looks like a floorless in disguise to me. I can't be certain without reading the details, though. The protection against early sale is meaningless unless they have a provision prohibiting shorting, which is only rarely present.

Paradoxically, in XOMA's case a floorless is less significant than in most stocks. The reason is that if the trials are successful, the stock will be above the floor, and so the "adjustment" won't kick in.

If the trials are unsuccessful of course, the "adjustments" will tank the stock even further.

So the optimistic view of this financing (assuming I am interpreting it correctly based on the limited info released) is that it is an expression of belief by the company that one of their trials will succeed before the adjustments kick in.

(I have no current position in XOMA).

Peter

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