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Why the Generex Reverse Split Now Makes Sense

|Includes: Generex Biotechnology Corp. (GNBT)

It's nice to know that the Generex Biotechnology (OTCQB:GNBT) directors have listened to some of the concerns that we, the stockholders, have regarding the direction of the company.  While the new reverse-split proposal isn't where I want it to be, it is much better than the original proposal.

Now let's see if the directors continue to listen.  While my preference for the reverse split of 1-10, while reducing the number of shares available for issue to 250-300M shares, I am willing to accept a 1-5 split with the number of shares available for issue shares being reduced to 500M.

A 1-5 split will reduce the number of shares outstanding to about 55M from the ~260M shares that are currently outstanding.  This would allow the company to still raise an additional $445M, assuming an average price of $1/share, to complete the testing phases of their products as well as beginning the sales and marketing work necessary.

If they perform a 1-10 reverse split, I would be very disappointed, since that would suggest that the directors have no faith in the management business plan.  In this situation, I would raise the average price of the remaining shares to be issued shares to $2/share, which means about $900M.  That is simply a crazy number required to get to a cash flow positive position if they are truly doing as well as they have told us. 

I realize that they will argue about a position of strength for negotiation purposes, but strength can only be achieved with approvals and sales!  If GNBT doesn't improve their sales of their current products, and their product approvals are delayed, then being able to issue shares is not a position of strength.

If things don't improve soon regarding the information flow and direction of the company, I might run for a director position.


Disclosure: Long GNBT

Disclosure: Long GNBT