Only three weeks ago.
I'm considering buying shares tomorrow.
With a decision so close why would they sell shares for less than $4.00? Why not take a short term loan rather than sell at such a low price and dilute the share base?
A company, just like an individual, without income cannot get a loan for $9.4 million. However, if you look at what Biodel did, they issued warrants at the same time to buy back the new shares. So they sold stock at $3.93 (about the price at that time) and issued warrants to buy it back at a maximum price of $4.716 @ share. Refer to the attached link to understand the warrants.
Now why would they need to raise just $9.4 million versus diluting the stock more and raising even more money which they could of done. Because they believe they are going to get approval, the executive mgmt and board also own shares of stock and so do not want to dilute it any more than needed. Yet the $9.4 gives them enough boost in their available cash on had to take the time to negotiate a good deal; whether a aquistion or partnership after approval. However, the warrants expire 30 days + 12 months after FDA approval, so they have time boxed this stock as an investment. Upon FDA approval, you basically know that a aquistion or partnership will be announced with 13 months at the outside. Based upon a conservative projected value of such an action, and that it is fairly clear that even if they do not get FDA approval now they certainly will within the next 6 months, you can do a very easy risk/reward analysis which makes purchasing Biodel stock at these prices a steal!!! I will take an easy 500%+ return on my money over at maximum a 18 month period any time of the day. So would any savy investor.
The company does not buy back shares at $4.76, they issue additional shares per the following paragraph.
"The initial per share exercise price of the warrants is $4.716. On the 21st trading day following the PDUFA date relating to the new drug application for Biodel's product candidate, VIAject(R), the exercise price will be adjusted to 90% of the arithmetic average of the volume weighted average price of Biodel's common stock on each of the ten trading days prior to the 21st day following the PDUFA date. In no event will the exercise price be greater than the initial per share exercise price of the warrants. The warrants will be exercisable beginning on the original date of issuance and will expire on the date that is 12 months after the 21st day following the PDUFA date. Biodel expects the PDUFA date to be October 30, 2010"
So what did they do? The raised the $9M+ and will raise at least $9M after the warrants (rights to purchase additional shares) are excercised. The bottom is set at $3.93 and the initial warrant at $4.71
What is long about this? First, they have locked in the required funds and second, it sure looks like they (management and large investors) don't expect the share prices to drop and stay below $3.93 or the warrant excercise period will expire.
What I like is the creativity of allowing the owner of the warrant to get a 10% discount on the shares per the paragraph. Like they said in the presentation, they looked at all of the options and acted accordingly.