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LONDON, UK / ACCESSWIRE / December 27, 2016 / Active Wall St. blog coverage looks at the headline from medical device company EnteroMedics, Inc. (NASDAQ: ETRM) as the Company announced the reverse split of its common stock on December 23, 2016. The Company's Board of Directors declared the 1-for-70 reverse stock split effective December 28, 2016, immediately at the start of the trading of the stock on the Bourse. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.
One of EnteroMedics's competitors within the Medical Appliances & Equipment space, ViewRay, Inc. (NASDAQ: VRAY), reported on November 14, 2016, its financial results for the third quarter and nine months ended September 30, 2016. AWS will be initiating a research report on ViewRay in the coming days.
St. Paul, Minnesota based EnteroMedics was initially named Beta Medical before being incorporated in Delaware in its current form in 2004. It is a medical device company that specializes in developing treatments for obesity, metabolic, and gastrointestinal diseases. The Company is known for its signature vBloc® vagal blocking therapy using a patented pacemaker styled device, called The Maestro® Rechargeable System. The USFDA approved device controls both hunger and fullness by blocking the primary nerve which regulates the digestive system thereby supports patients in weight loss without compromising their lifestyle.
Commenting on the announcement, Dan Gladney, EnteroMedics President, Chief Executive Officer and Chairman of the Board said:
"Completion of the reverse stock split is a crucial step in our strategy to maintain the Company's listing on the Nasdaq Capital Market and to enable the Company to continue its diligent work in highlighting vBloc Therapy's role in the ongoing battle against obesity. Additionally, as previously stated, we will meet our goal of converting or redeeming all of our outstanding convertible notes prior to the end of 2016 and look forward to working towards our long-term objective of securing reimbursement coverage for vBloc Therapy for all appropriate patients."
Implementation of the Reverse Stock Split
EnteroMedics' Board of Directors took the decision for the reverse stock split in a special shareholders meeting on December 12, 2016.
Each 70 shares of the common stock of the Company will be converted to 1 common stock. Any fractional stocks will be rounded off to the nearest whole share. The Reverse Stock split will be applicable from the start of trading on December 28, 2016. From this date onwards, the Company's common stock will begin trading on a split adjusted basis on the NASDAQ and proportional adjustments will be made to the Company's outstanding stock options and warrants. The Company's stockholders will be guided by the Wells Fargo Bank National Association in following procedures to exchange their old share certificates for new and for any book-entries required.
The decision for the reverse stock split is based on the Company's plans to comply with the NASDAQ's requirement of the $1.00 being the minimum bid price to continue to be listed on the Exchange.
The Amortization of the Convertible Notes
EnteroMedics also announced plans to amortize its complete Senior Amortizing Convertible Notes into shares of the common stock or through issue of fresh stock. The total value of the convertible notes was $18.75 million and the date of conversion has been set for December 27, 2016. These convertible notes had been issued to four institutional investors of the company vide a securities purchase agreement in November 2015 in three installments of $1.5 million, $11 million and $6.25 million respectively. The funds raised via these convertible notes were utilized for the various stages involved in the commercialization of its product "vBloc®".
Rationale behind the decision for Reverse Stock Split
The decision to undertake a reverse stock split was based on the notices received by EnteroMedics from the NASDAQ on two occasions regarding non-compliance of the minimum bid price of its stock. The NASDAQ has a minimum bid price of $1.00 per share as a condition to continue being listed on the Exchange. On the first occasion, in May 2016, the NASDAQ had sent a notice to the Company stating that its stock had been trading below the minimum bid price of $1.00 for 30 consecutive days. The second occasion was back on November 09, 2016, when the NASDAQ again sent a notice to the Company for the same, but this time indicating that the stock would be de-listed for non-compliance of the minimum bid price. The Company had a last hearing before the NASDAQ's Listing Qualification Panel on January 12, 2017. EnteroMedics had appealed for a hearing to the Panel before the final decision for delisting was taken.
At the close of trading session on December 23, 2016, EnteroMedics' stock price tumbled 7.52% to end the day at $0.05. A total volume of 16.79 million shares were exchanged during the session, which was above the 3-month average volume of 10.77 million shares. The stock currently has a market cap of $8.11 million.
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