DRL has till May 9th to regain compliance. It's April 10th, and the company has not brought a reverse split to vote. I'm assuming they will be granted another 6 month extension? Any thoughts? I'm sure they will propose a reverse split at the shareholders meeting in June.
I do not think a reverse split is necessary yet. In a reverse split nine out of ten the pps is lower in the next year. Reasons for a drop after a RS are many but the largest is when the company sells shares after the RS which furthers dilution in the end because they need to raise cash. DRL is well capitalized and really dose not need to raise cash. With a delisting problem they face, this is caused by an exchange rule that takes nothing but pps into consideration which is just a goofy rule but a rule non the less. DRL should just take the action to move to the small cap capitalization exchange for now and then continue to get their house in order. Keep in mind that institutional holders have all but left the stock. True that if the stock had a RS the pps would come up on radar screens of these investors but once they do their DD there would little change in their buying the stock, like I said it would most likely decline until the fundamentals say otherwise. And that is where it comes down too..., fundamentals. Management should care less about the pps at this time and continue to improve the fundamentals then the pps will take care of itself, that is what long term holders want IMHO. Now I have a bid to buy DRL in at this time but it is still above where I see value today for the risk. I do think they are making progress but let's face it, there is still a lot of risk and that will not go away just because of a RS.
Suppose that they do a reverse split. This would hurt many companies, but I think it matters much less for a bank. Banks tend to trade based on book value, profits and dividends. DRL is at less than 15% of adjusted book (adjusted for deferred tax assets that will be added back to book in the next couple of years). it's already far and away cheaper by that measure than any other well capitalized bank. Try and find another well capitalize bank for less than 25% book. Please let me know if you can find one, so I can buy it.
I don't think DRL is going to get any cheaper based on whether or not they do a reverse split. If it did get cheaper based on a reverse split, that would be a great temporary buying opportunity.