[Saturday dawn updates, throughout — to include my thoughts/analysis, after a solid night of sleep. Smile.] Here is a direct link to it, but commenter “Tim” was right — the obligation to buy stock is limited by how much volume trades in the stock, and at what prices.
So it could end up being less than $15 million in gross proceeds to the company, but not more.
And in truth, it could be pretty highly dilutive. Here’s a bit of the summary in the 8-K, but do read the full purchase agreement, for the finer points of how it all works — under the obviously highly negotiated mechanical put pricing formulae:
“…[Humanigen (the “Company”) may] require Aperture to purchase up to $15.0 million worth of newly issued shares (the “Put Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”), over the 36-month term following the effectiveness of the initial resale registration statement described below (the “Investment Period”). From time to time over the Investment Period, and in the Company’s sole discretion, the Company may present Aperture with one or more notices requiring Aperture to purchase a specified dollar amount of Put Shares, based on the price per share per day over five consecutive trading days (a “Pricing Period”). The per share purchase price for these shares equals the daily volume weighted average price of the Common Stock on each date during the Pricing Period on which shares are purchased, less a discount of 6.0% based on a minimum price as set forth in the Purchase Agreement. In addition, in the Company’s sole discretion, but subject to certain limitations, the Company may require Aperture to purchase a percentage of the daily trading volume of Common Stock for each trading day during the Pricing Period. In addition, Aperture will not be obligated to purchase under the Purchase Agreement any shares of Common Stock which, when aggregated with all other shares of Common Stock then beneficially owned by Aperture and its affiliates, would result in Aperture’s beneficial ownership of more than 9.99% of the Company’s issued and outstanding shares of Common Stock….”
So if the prevailing NASDAQ per share price declines so much that the $15 million in total would cause Aperture to buy above the threshold for reporting on SEC Forms 3 and 4… Aperture will be excused from completing those purchases. This would be true, even if it is the dilution caused by the stock “put rights” themselves, that occasioned the stock price declines. Said another way, perhaps Aperture doesn’t want to be more than a 10 per cent holder — or perhaps Black Horse wants to limit Aperture’s take — of the potential PRV proceeds, to no more than 10 per cent. Condor’s observation? It is unclear which version is more likely.
Fascinating. That’s simply… fascinating. And so, Aperture could become a Schedule 13D filer (at above five per cent holdings), but it will stop just short of being a 10 per cent holder. Unless it decides in writing to accept 13D status, I gather.
Now we wait for a resale registration statement to be filed. The pricing mechanics alone are rather intricate — I’ve never seen such a thing, in 34 years. I’ve seen lots of pre-negotiated discount callable subscriptions, but never one that set a hard dilution limit, in favor of all prior common stockholders at a public company. Usually, if a third party agrees to buy in (i.e., someone in Aperture’s shoes), in a situation as fraught with risk as this — the committed buyer pretty much controls all outcomes. This speaks to the power that Black Horse Capital, et al., still wields at the table, one year post the reorganization in bankruptcy. As I say, fascinating.
Onward — even as monstrous Harvey loses strength as it moves slowly inland, and away from the New Orleans crescent seaboard by the luminous Saturday dawn light. . . do stay safe, one and all.