StemCells' 1-for-10 Reverse Stock Split

Jul. 7.11 | About: StemCells, Inc. (STEMD)

StemCells Inc. (STEMD) began trading on a split adjusted basis on the Nasdaq Global Market at the opening of trading on July 6. While the reverse stock split does not change the intrinsic value of STEMD, the split should broaden the appeal to investors favoring stocks trading above a $1.00 a share. Upon the effectiveness of the reverse stock split, each 10 shares of the issued and outstanding common stock will be automatically converted into one issued and outstanding share of common stock.

  • The reverse stock split will affect all issued and outstanding shares of the common stock, as well as common stock underlying stock options, warrants and other common stock-based equity grants outstanding immediately prior to the effectiveness of the reverse stock split.
  • Each stockholder’s new share count will be rounded up to the nearest whole share if the number of shares is not evenly divisible by the ratio of the reverse stock split.
  • There will be no cash or fractional shares issued as part of the reverse stock split.
  • The reverse stock split will not affect any stockholder’s ownership percentage of the common stock, except to the limited extent that the reverse stock split would result in any fractional shares being rounded up.

The reverse stock split will reduce the number of shares outstanding from approximately 137M to approximately 13.8M. Concurrent with the reverse stock split, STEMD will reduce its authorized number of common shares to 75M. The number of shares available under the equity-based plans will also be proportionately reduced.

In deciding to proceed with the reverse stock split, its board of directors considered several factors, including the Nasdaq continued listing requirements, the historical trading price, volatility and volume of its common stock, and current market and economic conditions. At the annual meeting, stockholders approved the reverse stock split by an affirmative vote of more than 80% of the votes cast.

The trading symbol of “STEM” will not change as a result of the reverse stock split, although it is expected that Nasdaq will append a “D” to the ticker symbol for approximately 20 trading days following the effective date to indicate the completion of the reserve stock split. In addition, the common stock will trade under a new CUSIP number, 85857R204, effective as of July 6. A good move by Marty McGlynn, but he will need a number of catalysts going forward to migrate any broad selling.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.