Rather than add to the huge volume of APC comments the Reverse Split has generated in the mere 2 days since the RS filing, I'll do this instablog and link to it on APC. Those interested can post thoughts here without adding yet more to the Concentrators on this. I think the Reverse Split proposal is very important and I hope all shareholders consider all aspects carefully before casting their vote. I encourage everybody to contact Axion's Investor Relations ASAP if they find the terms objectionable so Axion can alter the proposal to be equitable prior to the vote.
Background
The filing asks us to vote in favor of a reverse split somewhere between 1 for 20 and 1 for 50 shares. We will have between 1/20th to 1/50th of our former share count. Yet the 350 million shares we previously 'authorized' will not be adjusted in kind, nor adjusted at all, per the filing. In effect, instead of a headway of increasing the outstanding shares by 350m/225m or 55% currently, under this proposal the Board would get a headway of as much 350m/4.5m or 7700% more stock they could issue without any stockholder approval. I find this 'pork' that was slipped into the 'bill', whether it ultimately turns out to be material or not, to be extremely offensive and thus worrisome for the audacity of it alone.
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We are given two arguments why we shouldn't worry:
(1) The NASDAQ will protect us by ensuring we can vote on any share issuances.
My answer: We are not on the NASDAQ yet nor is there any guarantee we will be on NASDAQ if the split proposal is approved, nor any guarantee that if we get a NASDAQ listing we won't be delisted at some future date. This protection could be completely hollow.
(2) You can trust the Board not to be fast and loose with issuing the authorized shares.
My answer: Then why did it matter that the NASDAQ is protecting us? If (2) is true then (1) is meaningless and unnecessary. So I guess (2) is not such a certainty after all.
Further, any authoritative body that drafts a legal proposal to prorate all quantities equally and fairly is heading in the direction of earning my trust. Any such body that proposes things that are oddly unequal, unfair, and grossly distorting of the relative quantities prior to the proposal for no given reason is heading in the direction of warranting my distrust.
Thoughts
This whole debate is ass backwards. We shareholders are made to feel as though something is wrong with us for questioning grossly distorting, unequitable terms. The Board should be on the spot, not us, for proposing such terms.
Instead of the Board/CEO coming clean and asking shareholders for effectively what is a sky high authorization, it is not mentioned at all. Keen eyed shareholders have to spot it. In fact we are erroneously told "the net result leaves the shareholder exactly where they were before the split." Not true Mr. Granville.
If they aren't going to issue astronomical share quantities, then they don't need astronomical authorizations. Just keep it the same ratio. Prorate everything!
Analogical Musing
To conclude my rant, I'll use an analogy. It's not perfect but close enough to show just how ridiculous this proposal is:
Your neighbor comes to you and asks for a duplicate set of all your house keys. He says,
"I've been a good and trusted neighbor for years, you know me well, and you know I would NEVER under ANY circumstance use the keys. And while you're at it, you might as well give me the keys to your garage and cars too. And let me again assure you that for no reason under heaven will I EVER use ANY of the keys."
My answer: "Ok then. If you will never ever use the keys then you don't need a set."
Disclosure: I am long AXPW.