Thursday, June 08, 2017

Galapogos GLPG huge increase in book value despite cash burn: rough math

Book value per share of Galapagos has increased from €9,34 at the beginning of 2017 to roughly €22 today, a 235% increase.  How did that happen?


Note: I have no clue of the intrinsic value (discounted future cash flow) of Galapagos. The following doesn't take warrants, etc into account and might be completely wrong. I am not an expert, this is outside my circle of competence.

Here is my back of the envelope math. (m = million, equity = book value)

January 1st 2016:

Company Equity (Book Value): € 365m / 39m shares = €9,36 Book Value per Share

The company has had a "cash burn" of about €150m since then.

Expected Result: Equity €365m - cash burn €150 = €215 Equity expected today.

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But in the past year the company has sold 11,7m ? shares to investors at around €75 ? per share. This increased the equity of the company by 11,7 x €75 = € 878 extra "paid in capital" 

Total Equity today: €215m expected + €878m = €1 093

Shares outstanding today: 39m + 11,7m sold = 50,7m shares outstanding today

Book Value (equity) per Share today: €1 093m equity / 50,7 shares = €22 book value per share June 2017

, questions or E-mails welcome: ajbrenninkmeijer@gmail.com

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