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duhwhataloser
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duhwhataloser is a scientist who dips into stocks for time-to-time. The psuedonym reflects how people interpret his statements and opinions, particularly when they are contrary to their own belief. While the psuedonym is not considered professional, it saves the author time from having to review... More
  • Reverse Stock Split and GNBT 0 comments
    May 12, 2010 1:18 PM | about stocks: GNBT
    Well, I see that GNBT is planning on doing a reverse stock split.  While I applaud the reverse split, I am disappointed in the following line found in the proxy statement:

    (ii) following the reverse stock split, to maintain the authorized shares of common stock at 750,000,000;

    So if GNBT does a 1-10 reverse split (assuming 750M are outstanding), that means that the management of GNBT would be able to issue another 675M shares to fund operations.  That's a whole lot of dilution.

    While I am concerned about dilution, what this really has done is shaken my faith in the Management Team and the Board of Directors.  To me, it seems to indicate a lack of faith in the business strategy.  If the Board and Management have no faith, then what are we as investors suppose to have?

    Assume a 1-10 reverse split, that puts the pps at about $3.  Realizing that the average price would be weighted down, let's put the average at $1.  That means the Management Team and Board of Directors feels that potentially an additional $675M needs to be raised to bring the company to cash-flow break even.  That's an awful lot of money.

    I completely understand the need to be able to issue additional stock to fund operations, GNBT could do a little more to stabilize the faith of the shareholders by reducing the number of authorized shares of common stock.  While a reduction to 75M on a 1-10 reverse split would be unreasonable, a reduction to 150-250M shares would be reasonable.

    It is because of this, I will likely vote against the reverse split.  In fact, I might seek a seat on the Board of Directors if I can get nominated.

    -duh

    P.S. It looks like TheStreet.com has put a muzzle on Adam Feurestein as his latest article was very matter-of-fact like.


     


    Disclosure: Long GNBT
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