In January 2009, prior to results on AppyScore (which were ultimately viewed unfavorably by the market causing the shares to plummet), the market collectively valued APPY at $238 million (= fully diluted shares outstanding of 31.2 million(1) x $7.63 share price(2)). Let’s assume this represents a base valuation for AppyScore and let’s also assume that the value of this technology has not changed substantially since January 2009. If we take the $238 million value and divide by today’s fully diluted shares outstanding of 37.5 million(3), we get a price per share of $6.34. Options are currently only pricing an upward move of around $0.75~$1.00 from Friday, April 9, 2010’s closing price of $2.33. If results are positive, the shares should logically trade north of this $6.34 value at the very least (assuming our assumptions are valid).
The market is apparently not very confident in the up-and-coming results. This may represent a very low risk / high reward trade for Call option buyers.
(1) As of December 31, 2008.
(2) Closing price as of January 16, 2009.
(3) As of March 5, 2010.
Disclosure: Long APPY Call Options