Reverse Splits and Uplisting
We view uplisting to NASDAQ — one of our corporate goals for 2015 — as an important and positive step in InVivo’s long-term growth strategy. One of the quantitative requirements for initial listing is that the closing price of our stock must be above $3.00 for 5 days. Properly executing our planned reverse stock split allows us to fulfill this crucial price requirement and reap the benefits of being on NASDAQ.
Ultimately, we believe the uplisting and higher stock price resulting from the reverse stock split will make our stock more attractive to a broader investor base. Currently, many institutional investors cannot invest in our company for a number of restrictive reasons, including our lower stock price, our trading on an OTC market, and related volatility. Furthermore, we will be in a better position to attract Wall Street analysts to cover our company’s progress with a higher stock price. The inherent increase in visibility associated with analyst coverage can also translate to greater liquidity for our shareholders.
Companies execute a reverse stock split for one of two primary reasons. It is important to discuss the distinction and motivation behind the two routes to fully appreciate what drives market perception of this action.
Reverse Stock Split by Companies to Avoid Delisting
Companies already listed on a major national exchange (NASDAQ or NYSE) must abide by a strict set of rules in order to maintain a listing. One such rule is a minimum price requirement; companies that have fallen under the threshold risk losing their listed status. These companies tend to be viewed as underperforming (as evidenced by their low stock price) and execute a reverse stock split simply to maintain their listing. In this case, the split is used to avoid the negative market perception of losing their listing.
Over 50% of reverse stock splits executed between 2010 and 2013 were in response to stock exchange deficiency notices
When the shorts cover they buy the stock, hence the price goes up. Don't think this is the case.
Over 50% of reverse stock splits executed between 2010 and 2013 were in response to stock exchange deficiency notices, so it is no surprise that there is generally a negative market perception of a reverse stock split for this purpose.
Reverse Stock Split by Growing Companies to Gain a Listing
In comparison to companies executing a reverse stock split to maintain a listing, companies that execute a reverse stock split in order to uplist often have an upward trajectory. Such companies can often deliver positive stock price performance post-split as they take an important step in their growth. Other key attributes of companies that conduct successful splits and uplistings include having sufficient cash to reach near-term milestones, consistent news flow, and a commitment to transparency in communicating company goals with investors. InVivo intends to follow this trajectory.
In selecting the 1-for-4 reverse stock split ratio, we decided on a target price above
$10, which is an important psychological threshold for stocks. We evaluated previously executed reverse splits associated with an uplisting and found that 1-for-4 reverse splits priced in the $10 range generally performed well post-split.
We look forward to reporting to you on our anticipated success following our reverse stock split and planned uplisting and thank you for your ongoing support and confidence.
Mark Perrin, CEO and Chairman
March 24, 2015
I'm out. Took the chance and sold my entire position when I saw 40k on the bid at $0.6. Must say that I feel relieved now, albeit I took a 33% loss. Good luck to anyone still holding!
I doubt we'll see any updates from Jason in the next few days. This is what he tweeted yesterday:
Mauro Cristuib Grizz @MauroCristuib
.@JNapodano Jason, are you still following $ULUR? Any comments about their CC?
Jason Napodano, CFA @JNapodano
@maurocristuib Kind of giving up on that one. CEO never responds to my questions and each quarter its one excuse after the other.
We have activist shareholders. From todays SC 13D filing:
Item 4. Purpose of Transaction.
The Reporting Persons acquired beneficial ownership of the securities reported herein for investment purposes. The Reporting Persons may acquire or dispose of additional securities or sell securities of ULURU from time to time by means of open-market purchases or dispositions, privately negotiated transactions, direct acquisitions from or dispositions to ULURU or a subsidiary thereof or otherwise.
Between November 2014 and March 2015, Michael Sacks, an investor in ULURU, engaged in correspondence with management and representatives of ULURU concerning various topics, including ULURU’s business, operations, financial performance and financial disclosures. To date, many of Michael Sacks’ questions remain unanswered and he has shared his concerns with The Punch Trust (“TPT”) and Bradley Sacks, among others. As a result of his continued frustration with ULURU’s poor operational and financial performance, including poor performance by senior management, Michael Sacks determined that new individuals should be nominated as Directors of ULURU. Since Michael Sacks holds his shares of Common Stock through a nominee and ULURU’s Amended and Restated Bylaws (the “Bylaws”) provide that only stockholders of record may nominate Directors, after discussion between Michael Sacks and TPT, TPT determined that it would make the nominations.
On April 1, 2015, pursuant to Section 1.6(a) of the Bylaws, TPT sent a notice to ULURU nominating Bradley Sacks and Robert F. Goldrich (the “Nominees”) as candidates for election to the Board of Directors of ULURU at the next annual or special meeting of Stockholders of ULURU at which directors are to be elected and at any and all adjournments, postponements, reschedulings or continuations thereof (the “Stockholder Meeting”). Bradley Sacks is the son of Michael Sacks and the brother-in-law of Robert Goldrich.
Thay just can't draw from Lincoln when the PPS is lower than $0.45:
On February 18, 2013, we entered into a purchase agreement (the “Purchase Agreement”), together with a registration rights agreement (the “Registration Rights Agreement”), with Lincoln Park Capital Fund, LLC (“Lincoln Park”). Under the terms and subject to the conditions of the Purchase Agreement, we have the right to sell to and Lincoln Park is obligated to purchase up to $15 million in shares of our common stock, subject to certain limitations, from time to time, over the 30-month period commencing on July 17, 2013. We may direct Lincoln Park every other business day, at our sole discretion and subject to certain conditions, to purchase up to 150,000 shares of common stock in regular purchases, increasing to amounts of up to 200,000 shares depending upon the closing sale price of the common stock. In addition, we may direct Lincoln Park to purchase additional amounts as accelerated purchases if on the date of a regular purchase the closing sale price of the common stock is not below $1.00 per share. The purchase price of shares of common stock related to the future funding will be based on the prevailing market prices of such shares at the time of sales (or over a period of up to 12 business days leading up to such time), but in no event will shares be sold to Lincoln Park on a day the common stock closing price is less than the floor price of $0.45 per share, subject to adjustment. Our sales of shares of common stock to Lincoln Park under the Purchase Agreement are limited to no more than the number of shares that would result in the beneficial ownership by Lincoln Park and its affiliates, at any single point in time, of more than 9.99% of the then outstanding shares of the common stock.