If markets expect 50/50 outcome and SIGA is fairly valued at $160 million market cap, then PIP has 100% upside (currently at $80 million valuation).
If markets expect 50/50 outcome and PIP is fairly valued, then SIGA has 50% downside (even at these levels).
If SIGA gets better than 50/50 PIP is already trading at 50% discount to SIGA, meaning PIP's downside is cushioned somewhat by the fact that it already trades at such a significant discount. If SIGA is fairly valued terms and terms turn out 70/30 (SIGA/PIP), PIP would have about 35% downside at current levels.
If PIP gets better than 50/50 how much lower can SIGA go? Answer depends on how much worse, but in fairness I don't see terms much worse than 70/30 (PIP/SIGA). If that were to happen and PIP is currently fairly valued, then SIGA would have about 70%-75% downside. This places its value at between $40-$45 million (30% of PIP's $80 million =$24mln + $20 mln net cash).
SIGA has greater cash balance net of long term debt, about $20 million compared to just $10 million for PIP. But this $10 million spread would be of only modest consequence as detailed above. As a result, the SIGA's stronger balance sheet is of little value to protecting downside, especially if market is currently valuing SIGA on expectation of major win (economic terms better than 50/50).
From risk-reward perspective PIP has almost 3-1 (100%/35%) advantage. Even if we assume SIGA has potential to double on big win (which seems unlikely if PIP has anything above 25% stake in economics), it risk-reward ratio is still not as attractive because it has greater downside risk (100%/75%). As a result, at best SIGA has risk-reward of about 1.3x-1.
You appear to be VERY pro-PIP....and that's fine. But you should really know that there's a place for that, it's called the PIP board! What exactly do you hope to accomplish in convincing SIGA investors on the SIGA board (most of whom are blinded by stupidity anyway) that PIP is undervalued and will make out on the deal? You think these egomaniacs that can never admit to being wrong are going to SELL and buy PIP!?!? I can't even convince them that management is doing a poor job and you think you're going to convince them that PIP is the better investment?
Agree with your comments on SIGA management. Even with contract in hand they are doing disservice to shareholders with regard to communication with investors and revenue recognition. By contract the price per course is fixed prior to FDA approval. Hence revenue can and should be recognized even if FDA never approves the product. Their position on this is B.S. Only explanation I can think of is posturing for what if they lose scenario. Again, not a positive stance in my view by management and poor reflection on them by saying one thing and doing another. By deferring recognition they could attempt to defer paying PIP. Entire thing will create very confusing financials (large building cash balance, offset by deferred revenue and growing liability to PIP).
I actually made more money on my SIGA call option contracts in early part of the year than I did on my PIP shares and call options through entire year. I had purchased the SIGA contracts in January as downside protection in anticipation of a decision but sold them on rally in both company shares back in March. I used profits in initial SIGA contracts to roll out my hedge by purchasing more SIGA call option contracts that expired a week before decision. Leaving me naked and quite concerned.
My June PIP call option contracts are about to expire worthless at end of this week, but I still have small PIP position. After oral arguments I could understand why SIGA holders were holding out hope, hence my apprehension and hedge, as I thought SIGA's attorney did a better job of setting forth his points. However, with Delaware Supreme Court decision, my PIP apprehension is gone as it appears clear to me that despite the compelling arguments by SIGA's counsel for reliance damages and against expectation damages, Delaware Supreme Court laid out legal basis and justification for Parsons to award expectation damages.
At the very least, they should do as I did in January and consider protecting themselves on the downside.
Do you really think Parsons is going to come right back with the same ruling after having his wrist slapped? Doubt we see 50/50 again. I like SIGA's risk/reward much better than PIP's from here, but JMO. I bought at $3.28 and am thinking of averaging down.
Looking at the recent chart I think we're due for one of those unexplainable spikes to $3.40+
Dude averaging down into same position provides no upside if your wrong and only increases risk to your portfolio. Use some cash to invest in a hedge. If your right, you still make money but give up some of your profit (cost of hedge). If your wrong, you lose way less money in the long run. Looking at the chart only tells you what happened yesterday, last week and last year. If market tanks retreats 10% both these stocks will be down 20% or more. If market sells off 20%-30% they will both be down 40% until Chancellor Parsons makes a ruling.