No, your mistake is you keep running past the idea that the money they receive is committed. It is factored in as already spent ($0) because the company has made it clear that money will be spent. In a few quarter that money is gone and the new stock remains. Wall Street gets that and factors it in accordingly. The previous assets are not valued at zero under your scenario but their value is 'diluted' (there's that word) by spreading out their value among all of the stock which includes the newly issued stock.
You have me curious as to what you think a dilutive financing would be? I'm not aware of any company issuing stock to investors and not receiving anything in return, which would seemingly be the only way you think there would be dilution. Contact the company or your brokerage if this is dilutive. Frankly, this is an unforgiving sector to be learning about investing though.
Dilution is a math function not subject to debate or opinion: (New Stock)/(Previous Amount of Stock)=(Percentage of Dilution).
No Grey, you are mistaken in a couple of ways. Dilution is dilution, period. They are issuing a lot more stock which lowers the value of the previous stock. That is what dilution is. I think you're confusing that with book value in thinking that the stock issued is balanced by the cash they received for it. That too is wrong because while the issued stock will remain, they cash they received for it will be in fact spent and go away forever (salaries, keeping the lights on, etc.).
Let me put it this way. If what you posted was true, the company could issue an unlimited number of shares and it wouldn't effect the price as long as they received something for it. Pull up a long term price chart for the company and that will put the myth to that notion.
So there was nothing to the 'rumor' you posted. I am shocked (sarcasm). Here's the thing Denny. This isn't the 1990s. No one believes when someone posts here that they have inside information via a rumor or the word on the street. The shorts don't believe it. The longs don't believe it. I'm guessing the only ones who give those posts any credence are the people like you that keep making them up. I'm afraid that group of people is far to few to move the market.
Next time, why not just do an honest post? Simply list out in a reasoned way why you like or dislike a stock. Give it a try. (You may want to change your name though now that you are known as one of those silly 'rumor' people.)
Seeking Alpha will likely post the transcript of the call. (That's all SA is good for - don't rely on their bloggers.)
A few years back I sold my shares after it had been beaten down to $1, before the reverse split. It is amazing to think the equivalent price I sold at today accounting for the reverse split would be $15. I pop back here every once in a while to remind myself that management matters when investing in companies.
Denny, while I would love for the stock to shoot to new highs and trigger a short squeeze of epic proportions, you have to realize that everyone knows these days that when someone posts about a 'rumour' or 'the word on the street' it is simply that poster stating his wishful thinking and doesn't have anything to do with real information on real pending events. Instead of posting about a rumour, just start it off with 'Gee, I wish...'.
The quote from the last earnings call (March 7th) that I'm waiting to see something on from the company is "Today, I can report that we've moved to the final -- to finalizing terms with our selected partner in Europe and I'm confident that we'll execute this -- execute and announce this agreement in the very near future in accord with our previous disclosures. This will provide ample time to roll out in-country, target-market development activities prior to approval. We are in similar stage with other international partners in certain key markets and plan to execute these -- execute and announce these agreements at or about the time of FDA approval."
You put a lot more faith in the Max Pain theory than I do. Max Pain, to the extent it exists, just presents a pull on a stock and doesn't represent a ceiling or floor. Going to $3 is a little bit more than a 10% move, which is doable - especially if they announce that European partner they've been hinting at or some other possitive news. Regardless, I think it goes to $3 before it goes to $1.50 as the bears have predicted.
Another point of criticism that hasn't made sense to me is the price. I've heard the critics say that at $300 per person it is significantly more than the standard (though none of them are able to say exactly how much more). Let's assume it is double. A doctor comes to screen you for life threatening cancer and you can have the standard or LS which by some measures is 14 times more accurate and has fewer side effects. Is $150 really going to be a stumbling block? I certainly don't think so.
There are couple of things right off the top that don't make sense to me about your post. The institutional ownership is over 24%. Your notion that insitutions can't purchase doesn't hold up, and that's the reason I take it for that move in your mind. You even mention JPM as contradicting your notion.
You also mention that the stock price as reflected by market cap would go up 5 times more with a 5-1 split. What you aren't taking into account is you would have 1/5 the amount of stock. There is no direct financial benefit to shareholders with a reverse split. If your $1000 worth of stock goes up 10%, you have $1100 worth of stock with or without a reverse split.
Assuming approval I don't see a reason for a reverse split or see it in the cards.