50/50 split gives either company about $3/share in cash generating potential
The only true economic value is cash it can generate/distribute 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. Obviously this is a conservative approach, but without future orders neither company could maintain profitability. Using 50 mln shares currently outstanding that works out to $3.20/share for PIP. If you factor in two years worth of burn (assuming $5 mln/year which is double last year's burn rate) either by subtracting from cash or by factoring in dilution (which is more likely outcome) you end up somewhere around $2.75-$3.00/share. PIP has potential to be a nice double but not much more than that off securing 50% of profits ST-246. If PIP has pay/forgo first $40 mln as Parsons originally determined, then stock' could get to $2.00-$2.20.
This valuation approach yields similar values for SIGA though obviously without reduced potential that could result for PIP. SIGA currently has nearly the same share count as PIP, so on 50/50 split its worth about $3.20 (remember no dilution or $40 mln payment to consider). However, trading at $3.07 that means there is very little upside from a 50/50 decision. If court carries over the $40 mln upfront/initial profits provision the potential value for SIGA moves up to $4/share. In other words, I think it will take a significant alteration of the economic terms from Parson's to provide significant upside for SIGA on court action alone.
I think markets factoring latter scenario for both companies w/30% discount.
Best case scenario (both companies) would be resolution + subsequent order from BARDA to expand stockpile beyond the 2 million courses it has on order now. Even if government split initial 12 million course stockpile between ST-246 and CMX001, it would mean another $800 mln total contract value and ability for each company to generate an other $6/share
Yes, but that assumes 50/50 split. I think if you're betting on that you'll be disappointed. IMO the judge will be forced to rule more favorably to SIGA after the reversal from the SC. I think there is a ton of upside for SIGA from $3.07.