5 replies to this topic

[ambivalent]

It happened on Tuesday.

 

The title is niether clickbait, nor exaggeration.  

 

I wrote an extensive post here, but I hoped to deliver to a slightly wider audience with a more summarised post.

 

After the share price had collapsed by 40% in just a few days to a shatteringly low share price on Monday, which valued the company at half its Net Asset Value (assets minus liabilities) the CEO immediatedly issued a tranche of shares through a private placement, increasing the number outstanding by an incredible 150%. By issuing 20 million shares at $2.50, the CEO, Anavarin Ghosh effectively gave to the investor Cowen 60% of the company for nothing.  Here's how:

 

Of the $50 million the investors paid to the company, Cowen immediately own $30 million of it in equity. Also $45 million was raised 2 months earlier of which too they own 60%, so another 27 million. The company have likely spent $10 million over those two months, so that $95 million may be presently represented as $85 million (though they had plenty of cash elsewhere) of which those investors own $50 million in equity, realisable if there were a takeover tomorrow. 

 

Thus for their $50 million investment Cowen received a $50 million equity rebate and 60% of the company. As such they paid zero for that 60% of the company. So 60% of the NAV (excluding the funds raised through dilution) and 60% of the pipeline - 60% of the eye drug with exceptional phase 2 results two months ago, UBX1325.

 

The CEO has taken from shareholders, who have funded the research and operations, some for years, 60% of their holdings and given it away. It is, in fact, actually worse than this:

 

The shareholder base which accounted for 100% of the company the day before the first dilution in August, about three trading days after the phase 2 results, now own around 22% of the company - this has happened in a little over two months. The CEO has increased the shares outstanding by 350% over this period. If there had been no dilution, by the company's own August statement, they would be funded through Q1 next year: "$64.5 million in cash, cash equivalents and marketable securities, providing runway through Q1 2023.". So still 5 months of capital, I suspect it may have been for longer based on recent burn rate, resultings from the company's reduced size, but things change of course. 

 

Ths company has been de facto bought out. The public offering in August was not a public offeirng, the offering was closed the day after the prospectus was released with the funds fully raised, it is highly likely to be the same investors one way or another.

 

For that 78% loss of ownership those August shareholders have received in equity around $20 million. The NAV of the company at the end of June, 6 weeks before the first dilution, was around 40 million - 80% of that is $32 million. They haven't even been paid the NAV equivalent. 80% of pipeline, the reason why investors are there have been sold from under their feet, without any measure of consent, in a deal that valued said pipeline, despite its recent success, at zero. 

 

It is hard to say what the company was worth the day the phase 2 results were released, the share price is always wrong - on Tuesday it was valued at $35 million, half the present dilution enhanced NAV. During the darkest time in its history at the beginning of 2021 it was 500 million, when it had barely ever been in a worse state. 

 

On the few days following the phase 2 results the best day in the company's history, Unity was heavily traded on a market cap between 80 and 120 million. It is essentially this company in its pre-diluted state the CEO sold 60% for absolutely nothing on Tuesday and around 80% for 20 million. 

 

One way of trying to put some thought on value is to consider only the 6 quarters from January 2021 to June 2022 as the company was in recovery phase. From recollection the company spent 90 million, 60 million on R&D, most of which was on progressing UBX1325. This was shareholder funded obviously, paying for the trials and the CEO's salary. Given the success of the trials and a much superior better than standard care treatment, those investors fronting up the money, taking the risks would expect a healthy return on that investment. The NAV was around 40 million at the time, they had cash more than debt and that cash would give them 'runway through to Q1 2023'. And probably a couple of months beyond.

 

So investors spent 60 million mainly on the drug over 6 quarters which resulted in considerable success, it too validated the science of senolytics which had taken a hammering over UBX0101. $200 million wouldn't seem an unreasonable figure for the company at this point. $160 million isn't that great a return for investors funding the company for 90 million over the previous 6 quarters when the prospect of failure was very real.

 

Whatever the value assigned to the company on readout day, 60% of that company was sold for zero, 80 percent for $20 million over the last couple of months. By my modest estimate those investors have had $140 million stolen. They owned 100% of the celebrated drug a couple of weeks into August, now they own 22% and those investors were given less than the NAV of the company for their trouble. Shareholders were not asked for their approval of this sell off, of 80% of the company. I dare say they wouldn't have given it. It is an investment scandal, an absolute fraud. 

 

Investors in Unity Bio paid the price for the company's failure of its flagship arthritis drug UBX0101, and have now paid an equal price for the success of its flagship replacement UBX1325.

 

 

Edited by ambivalent, 28 October 2022 - 12:55 PM.

[Mind]

The latest offering was available to the public initially, correct?

[ambivalent]

The latest offering was available to the public initially, correct?

 

Thanks Mind,

 

Yes you're right, I had been a bit System 1 when viewing the announcement, Cower are brokers - but that made no difference in August, the prospectus was released on the Friday and the offer closed on the Monday: $45 million secured. So it was no public offering - but it didn't matter then, like now, since that offering price is now on the open market and the August offering price has always been above the SP since, so nothing was missed, but that wasn't the point of the offering - it was designed to push the price down to where we are. The warrant kept it below 85 cents, so a rational resurgence in price couldn't happen (i.e. the share price should have logically averaged $0.75 with $1.40, but the egregious warrant inhibits that, or at the very least it was a lever to be pulled to stop any recovery, I hadn't spotted how cynical that move was til now - current price was the destination set then).

 

Still, they haven't closed this offering yet it so perhaps they are having second thoughts if investors have contacted them - if it isn't cancelled I will certainly report to the SEC and I will encourage others to do so, and perhaps there will be significant enough investors to issue a lawsuit.

 

Anyhow, it doesn't matter who they sell those 20 million shares to public or private, it values the company without the remains of the August dilution at zero, selling off 60% of the company for nothing.

 

It is insanity for the market to value that August company plus two months at zero, yet the CEO has caught that disease the very day the price arrives there after collapsing 40% in a few days and then increases the shares outstanding by 150 % while valuing that pre dilution company two months on at zero, considering the 45 million minus two months spend to be the only risidual value in the company, about  35 million, when in fact those purchasers of that August 45 million offering valued the company around 40 milion (given warrants).

 

So at the end of June the company's 10-Q valued the NAV at 40 million, immediately before the P2 readout, the market cap was a suppressed 55 million, 3 days after the readout between $80-$120 million, his August public offering valued the company at around say 40 million (given warrant inclusion, 50 million without warrants).

 

Two months on the CEO decides the day the market essentially values that August company (removing the subsequent dilution) at nothing. So now he believes the only value within the company is the 35 million left of the dilution, because the market says so on the back of a 40% decline in 4 or 5 days on volume less than $1 million day and notably the CEO dismisses the market valuation two months earlier where over the three days before his crushing dilution following the UBX1325 readout, the market traded traded perhaps $200 million at a valuation of between $80-$120 million, which he ignores and decides to go for 40-50 million as the right price, destroying investors holdings overnight by 50-70%.

 

And this while the company has funds for at least a year, when in fact in August before any dilution they boasted being capitalised through Q1, still 5 months away.

 

It is all complete insanity or extremely nefarious. 

 

The bottom line is that if this dilution goes ahead, the readout-day investors who bought a piece of the company, a piece of UBX1325, will have lost 78% of their stake in the company and drug, for much less than pro rata NAV of the company. They have already lost 45% at around NAV alliedto a crushed share price. The CEO will have sold off around 80% of the company they owned, for $20 million.

 

If it goes ahead it has to go to the SEC.

Edited by ambivalent, 28 October 2022 - 09:17 PM.

[Mind]

Seems somewhat nefarious to me as well.

[ambivalent]

Well, in fact the 50 million dilution citing the $2.40 price was an ATM, rather than an agreed dilution. So, a threat one might say to sell 60% of company at zero. This was on the back of phase a collapse in share price and with $90 million enough funds to last 18 months at present burn rate. So no rush or scare. To introduce it on the back of that collapse is to spook investors. And the ATM gives them license to do as they did a couple of months back. 

 

One thing to note they have just released the 24 week DME data 10 weeks after the coupled 12 and 18 week data, one would assume 4 weeks longer than necessary. The delay in releasing the 12 week data enabled an extended period trading period at an all time low price, accumulating before dumping in the pumped marker. And we have something similar here - the results delayed, unnecessarily one assumes, coincides with a period of rock bottom prices.

 

So will the 50 million be diluted this week at another scandalous price? It looks likely. The stock is pre-market up 25 on a classic foment, trading at a price at around 25% below NAV - so still valuing the pipeline less than zero as they talk of initiating a pivotal study for DME in the second half of 2023.  If this guy is true to form he will dilute another 50 million because to meet expanded needs and do so at a price that is less than the NAV.

 

He has sold and will soon be selling off more of a company he doesn't own, without investor consent, valuing their investment in funding the pipleline at zero. 

 

 

 

 

 

I was looking back at August again -  I never paid attention to the intitial public offering because it was replaced the next day, but reading the form it was as follows AH on Tuesday 16th:

 

 

"19,379,844 shares of our common stock at an assumed offering price of $1.29 per share, which is the last reported sale price of our common stock on August 15, 2022."

 

On Wednesday 17th they upsize this offering to 45 million. Now one might wonder given the previous days announcement how they will set the price. Well, the 16th offering used the closing price on the 15th, of $1.29, the upsized offering might default to or least partly, $1.37. 

 

But of course that isn't what happened:

 

"...today announced the pricing of an upsized underwritten public offering of 64,285,714 shares of its common stock and accompanying warrants to purchase up to 64,285,714 shares of common stock at a combined public offering price of $0.70 per share and accompanying warrant. The warrants have an exercise price of $0.85 per share, are exercisable immediately, and will expire five years following the date of issuance"

 

They announce on Tuesday to selling over 20% of the company which values the pipeline at 40 million - this is priced at failure for investors, who've bankrolled the company for 90 million (60 million R&D) over the previous 6 quarters, and gien the trials begun in Q4 after the UBX1010 fail, as well as the cost of drug deveopment. So all the triumph results in investors being told they will sell a chunk of their holding which values the previous 6 quarters of R&D alone 60 milion research culminating in fabulous phase 2 trials at no more than 40 million.

 

That is bad, and a failure of fiduciary duty, he's selling what he does not own, at a failed price while simultaneously claiming the research to be a success. The market price as he will knows is nonsense, the previous months the stock valued the pipeline at zero - 18 months ago a few months after the ubx0101 fail, when the pipeline was close to its lowest the market was valuing it at 500 million. 

 

But with offering the second  day he values the pipeline when selling 45% of the company at about 7 million and compeltely ignores the market price togather. He sells off nearly half the company, at half the previous days closing price. And with warrants, valuing the pipeline at 20 million he has in fact sold off 63%, it is just a matter of time when the warrants are realised, unless a better offer comes along. 

 

But he sold 63% off without 

 

https://ir.unitybiot...ed-underwritten

 

"SVB Securities, Cantor and Mizuho Securities are acting as joint book-running managers for the offering. Wedbush PacGrow is acting as lead manager for the offering."

 

The prospectus is released on Friday, and the offer closes on Monday. 

 

https://fintel.io/do...t-22-19226-9660

 

And we have:

 

"The combined purchase price per Share and accompanying Warrant to be paid by the several Underwriters shall be $0.658, being an amount equal to the combined public offering price set forth above less $0.042 per Share and accompanying Warrant, subject to adjustment in accordance with Section 2(b) for dividends or distributions declared by the Company and payable on the Securities."

 

Well, I am not sure if this amounts to 0.658 - 0.042 for both warrant and share:

 

                  Name of Underwriter    Number of
Shares      Number of
Warrants  

SVB Securities LLC

     28,928,572        28,928,572  

Cantor Fitzgerald & Co.

     17,678,571        17,678,571  

Mizuho Securities USA LLC.

     11,250,000        11,250,000  

Wedbush Securities Inc.

     6,428,571        6,428,571  

Total

     64,285,714        64,285,714       

 

 

    

 

 

 

 

 

 

    

And there is the answer, the smoking gun. This public offering went straight there, with underwriters. No member of the public will have bought at the offering prices since they were always beneath it but of course no institution could buy those quatity of shares at the market price. These are the lorries parked out the back of the warehouse at 2am.

 

 

It is staggering stuff, really. And if these guys had agreed the deal days in advance, which is impossible not to imagine were the case, they could eat all they want on the market knowing the price would be destroyed by the CEO, who will put a concrete ceiling on the share price at 70 cents in a couple of days.

 

 

 

Edited by ambivalent, 01 November 2022 - 12:06 PM.

[ambivalent]

Today the stock rose 30% on the positve 24 week phase 2 data on volume twice the number of shares outstanding (which was almost certainly manufactured) and finished 4% down. And currently a further 5% down after hours. It appears to be returning to its all time lows valuing the company at half its NAV and so the much celebrated pipeline at -Half NAV, or around -$35 million. 

 

Yet the CEO will likely, I suspect, dilute over half the company shortly, at the 'market value' a company he does not own, on behalf of investors, wfor 50 million dollars which he has no immediate need of. 

 

What this CEO did in August and appears to be doing again is receiving investors who buy a stake of the success he claims and celebrates, as they did today, as they did in August, only to then him sell off those in some cases, newly acquired holdings at a price equivalent to the drug failing rather than succeeding.

 

The market is valuing the maybe 100 million investment in the successful trials over two years at -$25 million and the CEO will agree. 

 

This is not a market, and obviously he knows it. 

 

Would anyone trust the valuation of stock when promising phase 2 data spikes 30% to finish $4 down. 

 

The company is being stolen from investors - 63% already effectively gone representing an ROI on the pipeline of 20% for the 2 year investment, it may be about to get worse.