$ALT's Big Picture

For the past few weeks, I have been bashing $ALT due to its price action after lifting that 21 October suspension. However, reading an email about the importance of biotech sector, I got interested searching for biotech stocks in the PSE, and I found two: $ALT and $EURO.

After reading several news articles and company disclosures about $ALT, a big picture in my mind was formed about what's going on in the company. 

It all started with Mr. Navasero's dream of putting up the largest BPO in Asia for genomics. The challenge is for him to find a capital to fund Philab's business expansion. He's targeting a CAPEX of Php 2 to 3 B and included in that CAPEX is the plan to purchase the 20 hectares in UPLB and to create a healthcare mobile application. Once such capital is achieved, he is looking forward to a 4B revenue and he is expecting it to double into 8B the following year. In order to achieve this goal, he thought of backdoor listing Philab instead of taking the IPO road. 

Backdoor listing is a cost-effective way for a private company to go public in order to access the capital market. To do this, Mr. Navasero has to acquire an already publicly-listed company. In this case, he thought of $ALT as the way to go. And so last 12 August 2016, he purchased the 208,624,801 common shares of $ALT amounting to Php 362,324,961.21M or 1.74 per share.

Two months after, on 21 October 2016, $ALT obtained approval to acquire up to 361,390 shares of Philab or 100% of its issued and outstanding capital stock with a total price of Php 500M. Results of the transaction include the change in authorized capital stock of $ALT from 20M to 2B and the change in corporate name from Alterra Capital Partners Inc. to Philab Holdings Corp. Finally, on 16 November 2016, Mr. Navasero disposed 50M common shares @ 2.88 amounting to Php 144M.

Two questions come to mind:

One, why that buyer bought 50M common shares if the price of $ALT will continue to decline? I think that buyer contrary to the speculation of many traders that $ALT's price would drop to 1.74, was anticipating a higher price in the coming months and years.

Two, now that Mr. Navasero has disposed his 50M common shares of $ALT, what do you think is he going to do with that Php 144M cash in hand?