Hi John,
I have a stock that fits the criteria outlined in the header of this thread: COCN. It's a biotech that is debt-free and whose cash (here defined as the sum of cash, cash equivalents, and short term investments) as of 3/31/99 was $8,952,000 and whose shares outstanding as of 5/17/99 were 4,633,000, giving cash per share of about $1.93. While I'm writing this the stock is trading at $1 1/8.
I initially had an eye on it because it was a Michael Murphy pick gone bad. He still covers it. It was also covered by Jim McCamant in his widely followed biotech letter, and also used to be in the stabile of active H&Q biotech analyst coverage.
You perhaps won't be surprised to know it had a toxic convertible that caused some problems. But what caused me to finally jump in last week with a whopping 2K share purchase (woo woo!) was the fact that it bought back a sizable chunk of the preferred, leaving only a little bit left, $1.8 million worth. The original placement had been for $8 million about a year ago. They have a nice diverse platform and several products in their pipeline, and a couple of small partnerships. Hopefully they'll be announcing a partnership for their epilepsy candidate shortly.
There still remains a serious risk of delisting for this Nasdaq NMS stock- they reverse split, 8-1, back in April or so to get the bid above $1 to avoid such a fate. It looks like they have a decent chance of remaining listed, but it's a serious risk to be aware of; the critical time for this seems to be over. But hopefully, if this happened, they would just drop down a tier to the SCM. If they went OTC BB that would suck.
I've done some research which I've posted on the COCN thread (which is silent as the grave). I just did an analysis of the stock using a model that you might also be interested in checking out since I know you're interested in such things. It's the first time I've used it, and is designed specifically for biotechs. Anyway, the valuation posts I made start here and continue in sequence (four, I think).
Message 9650812
I'm approaching this as an educational exercise, so I'd appreciate any heavy duty criticisms that one cares to make. Heck, I'll be happy if someone simply calls me a bonehead. ;-)
I just don't understand why this thing is sooooo cheap. As you've noted, <<It's difficult for a stock to trade way below cash, because it would be too easy a takeover target.>> So I really don't get it in this case- what I guess is that it is now simply too small to be worth the trouble. Interestingly, though, it has a good deal of institutional ownership, probably folks that got stuck during its fall from grace last year when it had some disappointing clinical results.
Anaxagoras |
