Author Topic: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?  (Read 138038 times)

petec

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #220 on: June 19, 2018, 05:54:15 AM »
DC.PR.E (which by the way shows no fear like the rest of the capital structure does).

That's because they're puttable, which in effect means they rank senior to the other prefs. The YTM would be sky high if they traded much below par!

Interestingly they are also convertible at the company's option into common at the current price, which enhances the value of the other prefs IMHO and is potentially very dilutive to the common given the current market cap.

Actually the E shares are convertible into common at the current price or $2, whichever is greater. You might think the E holders would be a little worried about that with the common currently below $2.

Given that they're sitting on a bunch of liquid investments, I find it hard to believe that they'd dilute their own holdings in the common to pay off the E's.    I'm sure they don't want to sell off much DPM, but if it's a choice between that and diluting the hell out themselves, I think they would sell.   

I haven't read the E prospectus lately: can they do a hybrid thing, part cash part equity?

I can't remember but that's effective what they did with the D's I think, so where there's a will there's a way.

This may link into the buyback discussion in that they won't want to use any liquidity on un-necessary buybacks until the dilution risk is gone.


doc75

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #221 on: June 19, 2018, 05:57:43 AM »
Does anyone know much about TauRx? I am struck by the carrying valuation - both in that it is significant, suggesting real value is present (despite poor trials results) and in that it is discounted by 50%, suggesting rapid potential upside if the discount is removed.

Could be a zero, could be a hero, and I have no idea which. Does anyone?

I did a reasonably deep dive into this a while back.  My conclusion was that it should be conservatively treated as a 0.

They did some a questionable post-hoc statistical analysis on their last (failed) trial data, and are moving toward a new trial on that basis.  Outside experts are extremely skeptical -- with the analysis of the failed trial, and with the biochemistry of the drug itself (which is a derivative of the commonly used stain methylene blue).

Here's an old post.  You can find plenty more recent ones via the Google:

https://www.alzforum.org/news/conference-coverage/first-phase-3-trial-tau-drug-lmtm-did-not-work-period

I hope Dundee manages to sell off their stake so there is some fractional recovery.  But at this point I don't even know what they could get for it, so it may just linger there until a seemingly inevitable write-off.  As Jon Goodman said at the AGM:  There's a difference between book value and what we could actually sell these things for (paraphrased).
 

sculpin

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #222 on: June 19, 2018, 06:04:14 AM »
Does anyone know much about TauRx? I am struck by the carrying valuation - both in that it is significant, suggesting real value is present (despite poor trials results) and in that it is discounted by 50%, suggesting rapid potential upside if the discount is removed.

Could be a zero, could be a hero, and I have no idea which. Does anyone?

Casino-Backed Startup Eyes Alzheimer's Cure Worth $2.5 Billion

By Joyce Koh  and Livia Yap
March 1, 2018 at 8:24:41 PM EST

 TauRx will look at options including IPO if trial successful
 Big pharmaceutical companies have exited or failed in field

It hasn’t found a cure for Alzheimer’s disease and doesn’t have any drugs on the market. Yet, TauRx Pharmaceuticals Ltd. says the company’s worth about $2.5 billion as it embarks on its latest trial funded by shareholders including casino operator Genting Bhd.

If the trial proves successful, the Singapore-based company plans to apply to European and U.S. regulators for conditional or accelerated approval of its drug, TauRx Deputy Chairman Tay Siew Choon said in an interview in the city-state last month. It will also need to raise about $150 million to conduct a more comprehensive phase III trial, though at that point, it would evaluate options including an initial public offering or sale.

TauRx is pressing ahead in a field that has seen many of the largest pharmaceutical players from Pfizer Inc. to Axovant Sciences Ltd. exit or fail. Just last month, Merck & Co. said it will end a trial of its most advanced Alzheimer’s drug while Biogen Inc.’s shares tumbled after saying it was making changes to its trial. TauRx disappointed investors in 2016 when it said its LMTX drug failed to meet a primary goal of slowing the rate of disease progression when taken in combination with other Alzheimer’s drugs.

“We have consistently seen that our theory works, and there’s no reason to give it up,” said Tay. “Shareholders’ support and faith in us has not weakened.”

On top of a $71 million rights issue in October to fund the current trial, TauRx had already raised more than $500 million since 2002, according to Tay. The last financing round in 2016 valued the company at about $2.5 billion, he said. Billionaire Lim Kok Thay’s Genting invested $112 million in TauRx in 2012, becoming its biggest shareholder with about a 20 percent stake.

TauRx has been recruiting patients since November for the current trial, where it plans to test its drug on 200 patients with mild Alzheimer’s disease who aren’t taking any other medication. The results are expected in early 2019.

https://www.bloomberg.com/news/articles/2018-03-02/casino-backed-startup-eyeing-alzheimer-s-cure-worth-2-5-billion

bizaro86

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #223 on: June 19, 2018, 07:52:06 AM »
How venal are these guys? From the perspective of the common/remaining prefs it seems like the best option would be to cash out the shares with equity at $2, given that equity is grading at $1.69. That much dilution would tank the stock, so you could probably do a tender and get most/all the shares back for $1 to $1.50, which is potentially pretty accretive.

petec

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #224 on: June 20, 2018, 06:30:19 AM »
How venal are these guys? From the perspective of the common/remaining prefs it seems like the best option would be to cash out the shares with equity at $2, given that equity is grading at $1.69. That much dilution would tank the stock, so you could probably do a tender and get most/all the shares back for $1 to $1.50, which is potentially pretty accretive.

It might not tank the stock. All the liquidity issues and some of the leverage would go away, and I suspect there is also a dilution discount in the price now which would also go; plus you'd still only end up at about 0.3x book!

bizaro86

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #225 on: June 20, 2018, 10:01:40 AM »
It 100% would tank the stock, at least in the short term. There would be a huge additional supply of shares in the hands of buyers of the prefs close to Par. Those aren't people who want Dundee common, and many of them will sell indiscriminately.  The stock is well below $2 right now, and volume would be up and price would be down post a conversion,  so a big tender then would be timely.

There are lots of examples of companies converting income securities to common (usually debs) in the Canadian market, I can't think of one where the stock didn't decline badly in the short term.

doc75

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #226 on: June 20, 2018, 11:25:15 AM »
It 100% would tank the stock, at least in the short term. There would be a huge additional supply of shares in the hands of buyers of the prefs close to Par. Those aren't people who want Dundee common, and many of them will sell indiscriminately.  The stock is well below $2 right now, and volume would be up and price would be down post a conversion,  so a big tender then would be timely.

There are lots of examples of companies converting income securities to common (usually debs) in the Canadian market, I can't think of one where the stock didn't decline badly in the short term.

Absolutely agree.  I think it would kill the stock. 

Would it not also significantly hamper their ability to  raise additional funds, even years in the future?   

I think it is very unlikely that they go this route.    And I also think it's very unlikely they'd be astute enough to put out a tender if they *did* go this route!

 



Cardboard

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #227 on: June 20, 2018, 12:46:34 PM »
Come on guys...

They have $100's of millions of assets that can be sold to easily cover.
They have no debt other than this maturity of $82 million. Rest are preferreds "B" and "D" with no maturity.
They had cash of $37 million at HQ on March 31.
The unused credit line of $20 million (other than $3.8 million for letters of credit) will be renewed over the next few days with the new CFO and could be used to repay a portion of it.
Someone could lend them money at 8-10% subordinated only to the bank debt, guaranteed by assets with covenants, etc.
And I am certain that this preferred could be extended once more for a good chunk of existing holders if terms are slightly improved.

Cardboard

SafetyinNumbers

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #228 on: June 20, 2018, 12:52:36 PM »
Come on guys...

They have $100's of millions of assets that can be sold to easily cover.
They have no debt other than this maturity of $82 million. Rest are preferreds "B" and "D" with no maturity.
They had cash of $37 million at HQ on March 31.
The unused credit line of $20 million (other than $3.8 million for letters of credit) will be renewed over the next few days with the new CFO and could be used to repay a portion of it.
Someone could lend them money at 8-10% subordinated only to the bank debt, guaranteed by assets with covenants, etc.
And I am certain that this preferred could be extended once more for a good chunk of existing holders if terms are slightly improved.

Cardboard

There is an assumption that these DC.PR.E will all be put next June but it’s unlikely to happen. These same preferred holders have had chances to put their preferred twice already and have undersubscribed to that option each time. These will probably end up trading DRM.PR.A, slightly above par as everyone who wants to put does and everyone else sits and does nothing.
Top 5 positions: ELF IAM GCM.NT/GCM PIF EFR.DB

petec

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #229 on: June 20, 2018, 01:42:46 PM »
They have $100's of millions of assets that can be sold to easily cover.

Out of interest, what should they prioritise selling in your view? The obvious assets (DPM, Parq, and the Chad royalty) aren't at a point where they could be sold for full value. And the others, well, who knows if there is much value there at all?