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# PharmAthene, Inc. Message Board

• msgbrdpstr msgbrdpstr Jul 11, 2013 5:46 PM Flag

## SIGA value hypothetical question

For anyone interested in offering up the calculation, curious your thoughts...

There are roughly 49.5M PIP shares issued. There are roughly 52.1M SIGA shares issued.

If SIGA were to increase its issue by roughly 1/3, their pps would dilute to roughly \$2.08 given today's close.

If SIGA's pps were \$2.08 they would need to offer each PIP long roughly 1.36 SIGA shares for every 2 PIP shares owned.

However, this doesn't take into account the fact that SIGA longs would see their positions diminished by 1/3, while PIP longs would see themselves fully whole in relative terms.

Therefore: If SIGA were to increase it's issue by 1/3 and offer only 1 share for every 2 PIP (instead of the above-mentioned 1.36 shares), the dilution would be shared equally among all PIP and SIGA shareholders. If you are long PIP and you wouldn't take 1 for 2 to see resolution, please speak up...

To continue with the hypothetical (in a vacuum, to be fair): 10,000 PIP shares would become 5,000 SIGA shares valued at roughly 2.08 each and 10,000 SIGA shares would dilute from 3.15 to the same pps of roughly 2.08 in the process as well.

So the big question is: If this happened overnight, what could we estimate SIGA to be worth, after say one day's trading? Clearly SIGA with 75M shares issued would only initially warrant the \$2.08 pps.

Assuming the certainty would drive the new SIGA shares up by at least 1/3, this initial gain would at least make whole all shareholders for the dilution, so where's the downside for either party's shareholders?

So the calculation I'm hoping someone may be able to offer up, is... What do you think the new SIGA shares would actually drive to, given known contracts, revenues, and the resolved legal dispute--if there's the assumed roughly 75M shares out?

AND FWIW at what point do directors' duties require a resolution on terms beneficial to all? SIGA is going to lose big enough that this is going to look like it should have been a no-brainer in hindsight.

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• As posted, only true economic value is cash it can generate/distriibute to its shareholders. In other words, on this initial order (assuming pricing based on FDA approval, 80% margins, and 50% share of these profits) PIP/SIGA could generate about \$160 mln in cash. Combined that works out to \$320 million. If you question is what does the company look like from valuation perspective if after combination PIP holders have 1/3 and SIGA 2/3rd (assumes issues 1 new share to PIP holders for ever 2 they hold = 25 million new shares), then its simply \$320 million valuation/75 million shares = \$4.26/share. However, problem with this assumption is that it values PIP below where PIP shares are currently trading. At today's prices the offer would be worth \$1.575/share. That means, PIP holders are having to wait for markets to realize real value of combined company (while trusting SIGA's management) to deliver that message to the Street. Thus far, SIGA's management and their IR firm have done an abysmal job. Regardless, point is under this scenario PIP's taking ton of risk with no near term upside. For that reason it seems highly unlikely.

Typical M&A premium is usually closer to 30%-40%. In addition, such an offer would have to consider dilutive impact of options and warrants with exercise prices below the offer price. Starting with 48 million shares out and factoring in about 5 million additional shares, that would be around 53 million PIP shares. At implied takeover price of \$2.17/share (that's a 35% premium), SIGA would have to issue 36.6 million additional shares. That would give the combined company, total share count closer to 90 million shares. As a result, valuation in this scenario of the combined company could reach \$3.60. In fairness this would be decent deal for PIP holders (premium now with potential for more later) but it wouldn't be great for SIGA holders (especially those in above \$3.60, for them its horrible). QUANDRY that makes M&A unlikely.

• 2-for-1 and you got my votes on that plan. so long as the SIGA shares are delivered via distribution with an Ex-Date. Think we can get the Eriks to agree on a number between your 1.36 and my kinda-equally-wishful-thinky 4?