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Safeguard Scientifics, Inc. Message Board

  • apmarshall62 apmarshall62 Mar 16, 2011 3:50 PM Flag

    Significant Price Erosion Since the ABH runup

    I'm surprised to see the 15% erosion in the SFE stock price since the ABH-related increase to the $21.35 high.

    I'm a financial layman, but did go and take a look at recent IPO activity and found that the time from the initial filing to the IPO can be highly variable. It seemed to me that a lot of the medical-related companies seemed to be clustered around the 3-4 month time-frame. So, we still have a few months to go but Mr. Market doesn't seem to like the silence that goes with the quiet period, at least for SFE.

    I'm very, very optimistic about ABH but there are obvious risks with the macro-economy, and of course with the company itself. I do wonder how much lower the stock can go if the larger market continues to erode (would cash + ABH value represent a floor?).

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    • What do you think ABH is worth as an IPO.

      • 1 Reply to lsemaconga
      • I'd like to hear what others think ABH is worth but my perspective is unchanged relative to what I thought on Feb 25th which I've pasted below:

        The best news to me was the exceptional sales growth. The $146.7m easily exceeded the November guidance of $130m which had been a revision from the original projection of $120m. This 71% sales increase represents an increase of about $50m over 2009 sales which had been $45m (100% plus increase) greater than 2008 revenue of about $40m.

        So, in absolute dollars, growth is still accelerating.

        Now, if the $16m in extra sales were a complete surprise (they've beat in the past so maybe there was a "whisper" number amongst the professionals) and you assume a 5x multiple on revenue (the CLRT #) then that's $80m in additional company value (maybe $22m to SFE or $1.10/SFE share).

        So, you could argue that most of the increase in the SFE stock price today was because of the IPO announcement itself. BTW, at 5x revenue, ABH would be worth about $735m or about $195m / nearly $10 per SFE share.

        I've written about it before, and I still I think ABH's valuation should be significantly higher than that of CLRT. $1b, or $14/SFE share would be a good starting point for ABH in my opinion.

    • I agree completely. If one subtracts net cash and the likely value of SFE's 28% stake in Advanced Biohealing from SFE's market capitalization--call it a modified forward enterprise value--one gets less than zero. In other words, one is actually getting ownership of SFE's other assets for free. The stock should have gone up 50% instead of 13% the day ABH filed its S-1. And now that SFE has gone down below where it was before the ABH announcement, I am buying with both fists.

12.29+0.10(+0.82%)Jul 26 4:02 PMEDT