Update: Advanced Cell Technology Reverse Split

Aug.28.14 | About: Ocata Therapeutics, (OCAT)

Summary

Advanced Cell Technology has completed a reverse split.

This is one of the 7 steps which I previously outlined for restoring shareholder value and trust.

While not fundamentally significant on its own, this event is a harbinger of good things to come.

Advanced Cell Technology (ACTC) has completed a 100 for 1 reverse split effective today, which is a precursor to the company's stated plans to up-list to Nasdaq. This is listed as the last of the 7 steps for rebuilding shareholder value and trust given in my article, Advanced Cell Technology on the Doorstep, however that article specifically mentioned that this step could occur any time after the resolution of warrant issues, which has been completed. The event was also commented in my articles hours before it was announced. Kudos to long-time reader and new contributor Doug Dallam for the find.

Reverse splits are sometimes a harbinger of decreasing shareholder value, but that is typically in the case of a company trying to maintain a stock price consistent with it the listing requirements for its exchange. In a case such as this, the reverse split makes no fundamental difference, but up-listing is at least slightly positive as it brings with it greater stricter reporting requirements and thus access to institutional investors. Furthermore, the timing of this split may be a sign of good news to come. Had the split been performed after the publication of interim data or initiation of Phase II, we might have seen a decline in stock price simply on the reasoning that all imminent good news was out. That would not look good for up-listing. By contrast, reverse splitting now, leaves those two events in the future where anticipation can support and raise the stock price, making a stronger case for up-listing.

All in all, this looks like another savvy move by the new management, and if you trusted them before there's no reason to change that now. Note that there is typically quite a bit of misinformation from commentators on this stock. One here on Seeking Alpha went so far as to say that new preferred shares had also been issued, but the 8-K says nothing of the sort. I've noted before that one of the best features of ACTC is the tendency for its investors to mis-price new events, and the stock may see some short-term volatility. That only represents opportunity for investors who remain focused on valuation and the 7 fundamental steps that I've outlined. In particular, publication of interim data is almost certain to represent an inflection point for this stock. In the meantime, we're now exactly halfway along the path to the doorstep. We should see the remaining steps within the next few months.

Disclosure: The author is long ACTC. The temporary, post-split symbol for the new shares is ACTCD.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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