Comments on: BA Value Investors files 13D for VXGN; calls for immediate $10M distribution to shareholders

By: VXGN gifted to OXGN; VXGN directors abandon shareholders, senses « Greenbackd

Fri, 16 Oct 2009 04:21:51 +0000

[...] Value Investors had previously disclosed an activist holding and, in a June 12 letter to the board, called on VXGN to “act promptly to reduce the size of the board to three directors; reduce [...]

By: VXGN Full Value Committee nominates director candidates; VXGN clarifies rights to AIDS vaccine « Greenbackd

Wed, 30 Sep 2009 05:00:44 +0000

By: VXGN investors form “VaxGen Full Value Committee” to conduct proxy fight « Greenbackd

Thu, 10 Sep 2009 05:02:17 +0000

By: VXGN investors form “VaxGen Full Value Committee” to conduct proxy fight « Greenbackd

Thu, 10 Sep 2009 05:02:17 +0000

By: Daniel M. Ryan

Daniel M. Ryan — Fri, 10 Jul 2009 04:55:12 +0000

Call me cynical, but one tipping point for the cash distribution might be the intimation that less cash makes VXGN a less attractive nuisance-suit candidate. I don’t think this point will be openly bandied about because it remembles a trick used by – well, crooks.

However: if the suit is indeed without merit, and the 10Q claim of non-materiality is not just an exercise in rallying the faithful, a board of directors could justify doing so as being consistent with fiduciary duty.

By: greenbackd

greenbackd — Fri, 10 Jul 2009 01:10:59 +0000

Good analysis. Thanks, BW.

By: BW

BW — Fri, 10 Jul 2009 00:08:20 +0000

I think that your downside case – that VXGN is worth nothing if they pay the full amount sought by the landlord – is a bit pessimistic based on my analysis below:

- $36.7 MM of cash and investments

- $1.6 MM of restricted cash that represents CDs that support Letters of Credit related to the lease. Presumably VXGN would have access to these funds in order to settle the lease.

- $5.8 MM of total liabilities, but $5.4 MM of this is Long-Term and Current Deferred Rent. Deferred Rent is an accounting entry to capture the difference between straight-line amortization of the lease and actual lease payments. This amount is already captured in the $22.4 MM sought by the landlord. Therefore, only $0.4 MM of liabilities should be netted from assets.

- $22.4 MM representing the max settlement with the landlord

- $5.2 MM of cash burn to termination and severance per your estimate

=$10.3 MM of net cash at liquidation, or $0.31/share

I think the downside case is ~33% loss compared to an upside case of ~$1.00/share, or ~100% return, if any lease settlement is offset by proceeds from a sale of the company’s facilities.

As an aside, the breakeven case at the current market cap of $15.2 MM is a $17.4 MM settlement with the landlord – pretty rich.