Why is Jamba implementing a reverse stock split of its Common Stock?
The Company believes that implementing a reverse stock split will allow a broader range of financial institutions to invest in the Company’s stock. Some institutions are prohibited from purchasing stocks with prices below a certain threshold. By essentially raising the price of our stock, we are potentially increasing trading volume attracting investors who are capable of providing more stability for our stock and potentially infusing more cash flow to support important growth initiatives.
What will be the impact of Jamba's reverse stock split?
The Company is issuing the reverse stock split in the belief that, while there will be no immediate impact, the long-term benefits can be significant relative to the Company’s continued growth. The action will have no effect on the company’s financial value.
The reverse stock split will affect all of our common stockholders uniformly and will not affect any stockholder’s percentage of ownership interests in the Company. Shares of Jamba common stock and preferred stock will have the same proportional voting rights, rights to dividends and distributions, and will be identical in all other respects to our common stock and preferred stock now authorized.
FYI, for those who are worried about the upcoming event, Jamba’s reasons for the reverse split are the most honorable of all reasons to do a RS and should lead to a better / more stable stock for long term investors. I've seen a few company fall after doing a RS but most of those companies had severe financial problems and were implementing an RS in order to raise their share price enough that they didn't get delisted. Jamba’s share price is fine and has been for a long time, yetby raising the price they will attract more institutional investors (hopefully providing more stability to the share price). This should be considered a non event for most of us, yet it could lead to bigger and better things and increases the likelihood of a buyout should someone big decide they want to take over Jamba... A smaller more manageable share base is possibly an easier takeover target; personally I hope that never happens :)
The higher price may also make it possible for Jamba to be added to an index. I don't normally like reverse splits but it certainly worked out well for Biglari Holdings (BH) and it could work out well here.