SRNE’s SCLX shares are restricted shares that cannot be sold or transferred until May 11, 2023. It is the absolutely strangest dividend I have ever seen. It unlocks a lot of the value of SRNE’s SOTP from their SCLX shares (not all, as SRNE will retain ~60m SCLX shares post dividend). There are three interesting things about that dividend. Turning back to point #3, in late December SRNE announces the dividend of 76m SCLX shares. ![]() SRNE close that day for 135m shares SRNE owns, so that’s not really an “actionable” SOTP trade. To pick a random day, on December 20 SCLX closes at $3.29/share, so each SRNE share owns ~$0.95 of SCLX ($3.29 closing price * ~0.288 SCLX shares/SRNE). That’s ~0.288 shares of SCLX / SRNE share. SRNE has ~472m shares outstanding (per their November 10-Q ) and (per the table above) owns ~136m shares of SCLX. Even with SCLX’s stock crashing post de-SPAC, the implied value of SRNE’s SCLX’s shares are worth much more than SRNE’s stock price. SRNE has suddenly become a sum of the parts (SOTP) play. It’s curious to see SRNE buying something that bets on pretty strong SCLX price appreciation since SRNE already has so much exposure! SRNE buying warrants on the open market is a very interesting move SCLX is trading well below $10, and SRNE already owns 96% of them. That is not a small amount of warrants SCLX only has ~6.9m publicly traded warrants (that’s per their last 10-Q ). SRNE goes and buys ~1.4m of SCLX’s warrants on the open market ( see here and here ). Like most SPACs, SCLX has some publicly traded warrants that give the warrant holder the right to buy stock at $11.50/share. ![]() There are three curious things happening in December 2022 with SRNE / SCLX: ![]() Here’s where we jump in / where things start to get interesting. That’s all pretty standard stuff for deSPACs. The SPAC SCLX was merging with originally had >13m publicly traded shares out ( see p.7 of their 10-Q ) by the time all of the redemptions are finished, the SPAC’s public shareholders own just ~1.1m shares, the SPAC sponsors own ~4m restricted shares, and SRNE owns ~136m shares, or over 96% of SCLX ( table below from this 8k). As is typical with SPACs, there was a wave of redemptions. Assuming no redemptions, SRNE would own ~88% of the new company, implying their stake is worth roughly $1.5B. ![]() SRNE announces a deal with a SPAC to take their Scilex subsidiary public at a valuation of ~$1.64B. So I’ll reiterate again that nothing on here is investing advice, these two companies are small, illiquid, and quite risky, and you should really do your own work / consult a financial advisor / do all sorts of stuff other than read this blog (might I recommend trying a board game? My wife and I got into Lost Cities last week and it’s just a great two player game).Īnyway, there’s a lot of history here, but for our purposes the story begins in March 2022. Given the size, strangeness, and illiquidity here, I was tempted not to write the situation up, but it’s so weird and was taking up so much of my headspace I couldn’t help but put some thoughts to paper. It involves perhaps the strangest corporate action I’ve ever seen (a dividend from SRNE of another company’s restricted shares with the restricted shares not saleable or transferable for ~5 months), some of the strangest press releases I’ve ever seen (s everal include the contact information for basically every major broker in America ), and perhaps the most aggressive attempt I’ve ever seen from a company attempting to initiate a short squeeze. I’ll jump right to the point: the situation at SCLX / SRNE might be the strangest I’ve ever seen. Also, a quick hat tip to this article / author from a few weeks back, which is where I first heard about the situation. I just can’t overemphasize how much risk and uncertainty is involved here this isn’t investing advice and you should absolutely do your own research. On top of mentioning risky/small/strange stocks, this post is going to discuss shorting. I’ll disclose I bought a few SCLX warrants on a lark, so I do have a position here but it is an incredibly small one. Upfront note: this article is talking about two risky / small / strange stocks in SCLX and SRNE.
0 Comments
Leave a Reply. |