Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?

[doc75]

The discounted warrants brought in $60m cash. Approximately 1/3 of warrants remain outstanding.  They now have $140m cash at corporate, pretty much exactly the market cap at today's price. 

 

 

What's your point?

 

Just reporting the facts, ma'am. 

 

There is some possibility that an SIB for the common is in the works, so the relative sizes of the cash pile and market cap is of interest.

 

That might have some relevance if the company had no debt or prefs, and didn’t burn cash. But...

 

 

You don't think the cash to market cap ratio is even relevant when the company has suggested it is contemplating a SIB and is now sitting on enough $ to safely take a substantial bite?  That's a very high bar for relevance. 

 

For what it's worth I don't expect they'll do a SIB for the common any time soon unless  shares crater in a market panic.  My guess is that they want to recycle the $ into new investments alongside some 3rd party capital. 

 

 

[Guest brisbane]

The discounted warrants brought in $60m cash. Approximately 1/3 of warrants remain outstanding.  They now have $140m cash at corporate, pretty much exactly the market cap at today's price. 

 

 

What's your point?

 

Just reporting the facts, ma'am. 

 

There is some possibility that an SIB for the common is in the works, so the relative sizes of the cash pile and market cap is of interest.

 

That might have some relevance if the company had no debt or prefs, and didn’t burn cash. But...

 

 

You don't think the cash to market cap ratio is even relevant when the company has suggested it is contemplating a SIB and is now sitting on enough $ to safely take a substantial bite?  That's a very high bar for relevance. 

 

For what it's worth I don't expect they'll do a SIB for the common any time soon unless  shares crater in a market panic.  My guess is that they want to recycle the $ into new investments alongside some 3rd party capital.

 

So you think they are going to do -- or even could do -- a $140MM buyback of stock? I'd assume you don't believe they will or even can do that. Which is why saying they have a 1:1 ratio of cash to market cap is meaningless.

 

Again, if they weren't burning cash, had liquid assets, and didn't have preferred shares, then it might have some relevance.

 

Cash to market cap to me is really only relevant when: 1) the company is not burning cash; 2) the company has no obligations ranking ahead of the common stock; and 3) the company is in effect winding down, or at least shrinking its size. Otherwise the bulk of that cash either cannot be used, or is going to be used for some other purpose than buying back stock.

[doc75]

So you think they are going to do -- or even could do -- a $140MM buyback of stock? I'd assume you don't believe they will or even can do that. Which is why saying they have a 1:1 ratio of cash to market cap is meaningless.

 

Again, if they weren't burning cash, had liquid assets, and didn't have preferred shares, then it might have some relevance.

 

Cash to market cap to me is really only relevant when: 1) the company is not burning cash; 2) the company has no obligations ranking ahead of the common stock; and 3) the company is in effect winding down, or at least shrinking its size. Otherwise the bulk of that cash either cannot be used, or is going to be used for some other purpose than buying back stock.

 

Frankly it seems you're looking for an argument or still thinking I'm saying something I'm not.

 

The cash to cap ratio is clearly relevant in the context of an SIB.  It reflects their buyback capacity --- what fraction of the shares could (theoretically) be repurchased at today's price.  It's not all or nothing.  For instance they could manage a 20% tender at a price that might be pretty enticing for series 5 folks who were converted at $2. I'm not saying they're going to do it, but obviously if the cash/cap ratio were 1:100 then this wouldn't even be an academic possibility.  Hence relevant.

 

Note that I'm saying nothing about the wisdom or likelihood of them actually doing an SIB.  I think it most likely that they do not launch a large buyback but rather try to leverage the cash pile toward actually generating some money/fees.  It's clear from recent conference calls that they're well aware of their cash needs and also the softness of their other asset values.

 

 

[sculpin]

Now sitting on about $1.40 cash/share at the corporate level with an additional $33mm to come in if the rest of the DPM warrants are exercised by next May.

 

 

 

Dundee Corp.'s senior management will host a conference call on Monday, Nov. 16, 2020, at 10 a.m. ET, to discuss the company's third quarter 2020 results.

 

Third quarter 2020 results conference call and webcast

 

Date:  Monday, Nov. 16, 2020

 

Time:  10 a.m. ET

 

Webcast:  on Dundee's website

 

Live call:  1-888-231-8191 or 1-647-427-7450

 

Replay:  1-855-859-2056 or 1-416-849-0833

 

Replay passcode:  5533506

 

Dundee plans to issue a news release containing the third quarter 2020 results after market close on Friday, Nov. 13, 2020, and will also post it to the company's website. The conference call will be archived for replay until Monday, Nov. 23, 2020, at midnight. An archive of the audio webcast will also be available at Dundee's website.

[wachtwoord]

Dutch tender announced C$1.40 .. C$1.60 for up to C$20M. Already reported in November (but not posted here so I post it for those that missed it).

[doc75]

Dutch tender announced C$1.40 .. C$1.60 for up to C$20M. Already reported in November (but not posted here so I post it for those that missed it).

 

DC.A is trading just under the lower end so I guess the market is expecting this to be fully subscribed around $1.40.  I assume the expectation is that lots of Pref A holders will take this opportunity to jump ship. 

 

They still carry UHIC on the books at $39m (as of Q3).  The assumptions behind this valuation are outlined in their financials, but it strikes me that this almost certainly a 0.  Delonex is in rough shape. Warburg Pincus was trying to unload their stake in the summer. Not sure of the current state.

 

Dundee has said they're in active discussions about selling Blue Goose and TauRX.  The carrying value of Blue Goose was knocked down by $10m within the last year (Q1?) but TauRX has been carried at $41m for ages.  I presume they've had some indicative bids for Blue Goose but not for the TauRX stake.  In any case I expect Blue Goose to eventually sell at a 0-25% haircut to its current carrying value of $26m, and I'm skeptical they'll get anywhere close to $41m from TauRX. Frankly I wish they'd just unload TauRX at whatever price they can get before the current Phase 3 ends. I think its terminal value is 0.  The chance of success in AD drugs in near 0.

 

Reported NAV at end of Q3 was $3.36.  After marking things down as I've indicated above I arrive at NAV in the $2.60-2.70 range.

 

I support almost everything Jonathan Goodman has done since taking his turn on the family throne, including the idea of returning to their roots in mining.  But it's hard to see how they'll start scale the business fast enough to cover their ongoing cash drain.  They haven't articulated a plan in any detail and frankly it's not clear if they have one. 

 

 

 

 

 

 

 

 

 

[ADcure]

One needs to read FULLY the results of TauRx trials before recommending fire sale of that asset.

[doc75]

One needs to read FULLY the results of TauRx trials before recommending fire sale of that asset.

 

I've been reading them as fully as I can.  The point is that the trials were, by definition, a failure -- they missed their primary endpoints.  Post-hoc analysis is sketchy.

 

They just finished their next Phase 3 enrolment.  There seems to be growing buzz about tau-type drugs so I hope Dundee can sell TauRx at a reasonable (not firesale) price in the near future.  I certainly don't want them to wait until the results of the trial.  AD drug trials have a spectacular failure rate.

 

Of course I'd be very happy to learn your thoughts on their trials.  I'm not an expert and would be interested to hear a different perspective.

[ADcure]

Lady I know was diagnosed w/ early on-set AD in 2011 (age 62) and was in Tau Rx trials since then and has actually improved mentally overall. Granted, that is just 1 case, but----

[grandmasterG]

Dutch tender announced C$1.40 .. C$1.60 for up to C$20M. Already reported in November (but not posted here so I post it for those that missed it).

 

DC.A is trading just under the lower end so I guess the market is expecting this to be fully subscribed around $1.40.  I assume the expectation is that lots of Pref A holders will take this opportunity to jump ship. 

 

They still carry UHIC on the books at $39m (as of Q3).  The assumptions behind this valuation are outlined in their financials, but it strikes me that this almost certainly a 0.  Delonex is in rough shape. Warburg Pincus was trying to unload their stake in the summer. Not sure of the current state.

 

Dundee has said they're in active discussions about selling Blue Goose and TauRX.  The carrying value of Blue Goose was knocked down by $10m within the last year (Q1?) but TauRX has been carried at $41m for ages.  I presume they've had some indicative bids for Blue Goose but not for the TauRX stake.  In any case I expect Blue Goose to eventually sell at a 0-25% haircut to its current carrying value of $26m, and I'm skeptical they'll get anywhere close to $41m from TauRX. Frankly I wish they'd just unload TauRX at whatever price they can get before the current Phase 3 ends. I think its terminal value is 0.  The chance of success in AD drugs in near 0.

 

Reported NAV at end of Q3 was $3.36.  After marking things down as I've indicated above I arrive at NAV in the $2.60-2.70 range.

 

I support almost everything Jonathan Goodman has done since taking his turn on the family throne, including the idea of returning to their roots in mining.  But it's hard to see how they'll start scale the business fast enough to cover their ongoing cash drain.  They haven't articulated a plan in any detail and frankly it's not clear if they have one.

 

Didn't TauRX do a financing round last year for preferred shares that were convertible into ordinary share at a price of $ 200? Dundee still values their share at $ 30, a 50% discount to the financing round of 2016

so unless they come up with bad clinical results, I would say that their shares are probably worth at least double of what they are valued at on the books, so at least $ 82M, and if they were valued at $200, then they would be worth $ 270M

agreed, those are theoretical values, and they have to find a buyer to get that price, but I think that if they sell it in the coming months, we might be positively surprised by the price they'll get

[doc75]

 

Didn't TauRX do a financing round last year for preferred shares that were convertible into ordinary share at a price of $ 200? Dundee still values their share at $ 30, a 50% discount to the financing round of 2016

so unless they come up with bad clinical results, I would say that their shares are probably worth at least double of what they are valued at on the books, so at least $ 82M, and if they were valued at $200, then they would be worth $ 270M

agreed, those are theoretical values, and they have to find a buyer to get that price, but I think that if they sell it in the coming months, we might be positively surprised by the price they'll get

 

If I recall correctly, those pref shares came with distribution rights, which would be very lucrative should the trials succeed.  So it's far from an apples-to-apples comparison with Dundee's holdings.

 

 

[ADcure]

The upside potential of taurx will be measured in the billions, not millions. The risk/reward for Dundee, warrants hanging on to taurx. If they want to sell, I would be a buyer for a few shares, even tho I don't have millions.