Maxim Group...a lot of days late and a lot of dollars short
MDGN was trading above $10 for July, August, Sept, and much of October. What the hell was Maxim Group doing all of that time? Where were the investment banking advisory skills? Don't they ever talk to clients and understand their needs? This offering should have been made months ago...this filing and distribution was poorly handled and has cost existing shareholders a lot of unnecessary dilution.
I don't blame management too much. I blame them some for being naive and for listening to Maxim Group, which has done an AWFUL job here. Maxim Group failed Medgenics...they had plenty of time to get an offering done at a higher price...and maybe without warrants. Instead, existing shareholders get hurt because they couldn't execute efficiently.
Medgenics' management needs to find new investment bankers....someone who will provide updated research, support the stock better and get more institutional investors involved in the stock, and provide much better advisory services. This is what happens when companies have to go to shops like Roth Capital and Maxim Group and why Morgan Stanley, JPMorgan and Goldman Sachs dominate the market...they are just so much better at the same job...even for small firms. MDGN has not had any support from Maxim Group...haven't seen any research from Maxim since August 2011 when Maxim put an $8.00 12-month target price on MDGN. Well, this same banking firm is now going to place a secondary around $5.50...after the stock traded up substantially higher and held double digits for months, with on-going good news on the development and hiring front. Maxim provided zero support for the stock during the slide from $16 to $5.50, and took forever to get this deal done.
Honestly, Maxim Group should be fired...this is a terrible job by an investment banker...getting a secondary done at a 30%+ discount to their research price from 6 months ago.
Even though shareholders got screwed, MDGN is still way too cheap.
I most strongly agree except MDGN management is at fault for choosing Maxim. I know that they have been told by industry people that both deals could have been done MUCH BETTER. Their using Maxim is inexcusable.
BUT...MDGN were offering warrants and options long before Maxim. Partly due to not having finance on AIM, but partly because it benefited the directors who bought into the purchases. And it is a little like quantitive easing. Once you are on the warrants gravy train, people will want them next time. As I said on a different post, there are loads of bios that don't issue warrants. Having them here is a big downside. And you say you do not blame management, but there is an open label Phase II trial going on. Interim results could have been published to get the sp away at a higher price, but management have chosen not to release them. On AIM, we were getting interim results from the trials all the time. Almost monthly at one point.
Disagree on the warrant train thing. Small firms issue warrants...heck middle-market firms issue warrants as part of mezzanine financing. Warrants aren't a bad thing...they are long-dated options...presuming there's not too much dilution and the strike price is high enough to create a strong cash position for the company once exercised. And, options aren't an issue so long as they remain within 10% of total shares outstanding...which is pretty typical form management/employees in most capital structures.
The issue here is that warrants should not be necessary because the offering should have been done months ago. At the very least, Maxim Group could have already executed an SEC filing, allowing Medgenics to take advantage of the higher stock price at any time over the course of the past few months, with an "at the money" offering.
I would love to hear the Managing Director at Maxim Group who ran this deal explain what the #$%$ he and his team were doing over the past six months. They screwed their client here. Management should be #$%$. The Board of Directors should be #$%$. Existing shareholders should be #$%$. There are plenty of small cap healthcare/biotech firms issuing secondaries without warrants. So, why not MDGN. Well, it's seems pretty logical that Maxim Group either couldn't execute quickly enough on the filing, didn't know how to sell the deal correctly, or they don't have the distribution capabilities into the right funds.
Given all the huge end markets that are targeted, the very strong management roster, the uniqueness of the biopump technology, the outstanding results to date...this should have been an easy secondary offering....5 million shares at $8-$10....clean, simple, done.
The Offering states this cash, however much is raised with final pricing/terms, will provide capital through mid-2014. Medgenics managment needs to get a filing in place immediately, that they can update quickly, so they can take advantage of higher stock prices quickly, with at-the-money offerings. And, never have to deal with this situation again.