I remember that name all too well… FitBiotec.. which was finally sold from the bankruptcy estate for €5,000 to London.. the share price was eventually fractions of a cent!!!
4 Likes
That’s how it was – FitBiotec.
What could prevent Faron’s situation from drifting into that same vicious cycle?
Would this help?
The Jalkanen family announces they are putting x million (1 or 2 isn’t enough) into the share issue and shows that, instead of just words, they have strong confidence in the company’s future?
3 Likes
The Jalkasens don’t have that kind of money. If they subscribe for their own share, that will “be enough” for most.
6 Likes
Everyone, please calm down; a few days is an extremely short time in the stock market. I, for one, haven’t seen any clear sign that the offering won’t raise the funds; I certainly hope anchor investors are found, and they will be announced when the time is right. Every share sold has found a new owner, and through that, the subscription rights have an owner as well. The price reaction was undoubtedly sharp—was it disproportionate to the announcement? Quite a few people think so. Panicking won’t help right now; let’s wait and see how the situation develops. Even Faron simply cannot start making sudden corrective moves in this timeframe; at the moment, it is the seller who dictates the price, and the buyer won’t pay a cent more until the dumping stops 
16 Likes
Is it enough for someone like Timo Syrjälä, whose wealth has melted by 25–30 million since the start of the year while invested in Faron?
He might be very cautious about putting any more into Faron.
I don’t believe he would put millions on the line just on the principle of “averaging down.”
As far as I know, he is not a so-called activist investor who wants to interfere in the strategy development or decision-making of the listed companies he owns—meaning his motive isn’t to influence the company’s operations and thereby increase shareholder value.
2 Likes
As a professional investor, he surely understood when placing his chips that a phase II biotech firm with practically one molecule is, if not putting everything on a single number in roulette, then playing everything on a single carré or simple, or at the very best, a douzaine.
3 Likes
The share price is currently already peeking into the 0.4€ range, so with the subscription price being significantly lower than the market price, is that 0.20€ (-0.25€) level starting to become possible?
Without taking a stand on what the realistic outcome of Faron’s offering will be: On a general level, even if the share were to briefly trade at 0.4€ on a volume of, say, half a million, it doesn’t automatically mean that the offering price couldn’t still be 0.5€ and be successful.
I have seen several cases where, for example, the market price has clearly fallen below the subscription price even during the subscription period, but the offering has still been well-subscribed, or even oversubscribed. Large pension funds and existing major shareholders don’t care if the market price briefly dips below the negotiated price. They want to ensure that the company gets the money it needs, and with these daily volumes, you couldn’t even get that many shares from the market without the price rising too much.
Generally, “the subscription price must be lower than the market price” applies to the price before the announcement of the offering’s size and price. Now Faron has announced it is seeking 40M EUR with 80M shares. That is significant dilution and the success of the offering is uncertain, so the assumed subscription price is 0.5€ and it dominates the share price. That’s why the price is drawn like a magnet to the 0.5€ level and slightly below it. After all, nobody should pay more than 0.5€ for a share if 0.5€ is the best estimate for the subscription price.
Regards, I haven’t invested in Faron, just as a consolation.
I suppose management of this level has consciously made the announcement in this diluting order. And certainly exactly as Pätsi puts it. Now all owners have the possibility to remain shareholders in the same proportion in the future as well, as the deal on the table has precluded the possibility of directed offerings.
In light of the information provided, I bet that the crowd that knows about that deal will subscribe at a high percentage.
But are all owners on equal footing?
2 Likes
Why is that? The share comes with a subscription right. If you buy a share now at, for example, Inderes’ target price of €1.5, it includes a subscription right that you can either sell or use yourself for a cheap subscription.
If you don’t even own the share, the only way to be able to subscribe is to buy the share before the rights detach or to buy the subscription right after the detachment.
Faron’s market cap is currently too low, meaning the stock is mispriced.
Because 80M shares is a lot relative to a share capital of less than 120M. Especially now, before information on pre-commitments and guarantees is available, it is uncertain whether Faron will get its offering fully subscribed. If existing shareholders do not fill the offering, others can subscribe without shareholder pre-emptive rights. That is usually how it goes.
Currently, with the price hovering around €0.5, it can be inferred that the assumed subscription price dominates, meaning that little weight is being given to the subscription rights. This is quite understandable given the situation.
If one buys a share now at, for example, Inderes’ target price of €1.5
You shouldn’t put too much value on target prices. They often tend to be overblown. The model they use for Faron is a pretty crude block model. In general, the model doesn’t really suit phase-stage companies for which financing rounds are expected before a binary event like a “partnership” or “phase results.”
Furthermore, if Faron has to pay installments on the convertible bond before the subscription takes place, it will have to pay four times the number of shares compared to before at the current price. This means four times the additional dilution for the loan compared to what was previously expected.