I think the conversation went like this:
SA: now that you and your team have validated the tech, you understand the only risk we have is execution of our commercial plan
BP: yes that’s a fair assumption, that’s where my team comes in, we’ll provide funding to fast track the execution, we’ll put in $10m so you don’t have to worry about anything in the next 12 months, you can focus 100% on the business
SA: thanks. And as we’ve discussed, on top of that money, we understand your passion for FRG and so we agreed to your condition to give you a seat on the board. Now let’s do some assumptions. If we succeed with water treatment, that alone should give us a revenue worth $50m annually in the first 3-5 years, and the air purification and medical sterilisation gives us 3x that amount. We’re looking to get this company to a $500m revenue in 5 years which should justify a mcap of $5-$7b. How about we take the lower range, $5b.
BP: looks at his team, and his team nods indicating they’ve run all the numbers in their most sophisticated program, and whispered, go for it but negotiate a discount. Now BP says: this is all good, but you know there is risk, so how about we value the company as of 8 November at $50m, I’ll take the 1.7m at 50 cents and give you the rest of the $10m by way of a CR, that equates to $2.40 per share? Deal?
SA: stunned, deal is at hand. At the same time he knows BP is smart he won’t agree to less than 90% discount. So based on $5 billion potenstial in 3-5 years, he agrees to $60m. He he reaches out to BP’s hand and shake a tight shake, DEAL!
Meanwhile, Beer and Co are busy running their own numbers and come up with a most conservative $20 valuation, having heard that this could be a at least $5b company in 3-5 years. They scrumble with most conservative figures putting only less than 1% market penetration.
Then PO3 starts commercialisation and progress the tests for other applications in India and OEM labs and try to get OEM partners ASAP.
Word spreads BP bought in at $2.40 at a 90% discount of agreed reasonable potential.
End
PDS: it’s a hypothetical story folks, but we’re definitely not worth $130m that the market currently attributes to us. The next few weeks and months will reveal!
Cheers
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