Why a reverse split is likely:
N.A.T I will do my best to answer -
The goal of all public companies is to raise money. When a public company raises money they do it by executing funding deals with another party like a VC firm.
For example management of company ABC wants to raise money to execute its business plan. Their stock is trading at .05 at the moment.
So they will get in contact with a funder (all those LLC you see on the quarterlys) and say..
"give us $500k cash and we will give you stock at .01" (remember the company is trading at .05 so the funder gets a discount and minimizes their risk.)
Then once the stock clears the funder pays for a promotion (this is the infamous third party paid promo) so since the stock is trading at .05 they do a promotion and sell.. making a nice return.
This usually is not a problem with stocks but when a company like FBCD does this over and over and over and over again we run into a problem.
FBCD, for what its worth, is infamous in the funder world.. I know this because thats where I work. For the record anyone I work with, or my self have never ever worked with or funded FBCD. People know that this stock has a history of dilution.
We are now at a place where the price is so low and so many shares are on the market that even when a funder does a promo they get a very small return.
Funding a company that the avg price is .0005 makes it hard to fund because you are at the floor.
SOOOOO
this is where the R/S comes in and by all means I am not trying to be a dbag or jerk here..
but if this new management, which I like more than leclerc, wants to raise more money they are forced in my opinion to do a R/S
Reason is because most funders do not want to touch FBCD since it has been a sh$%show... luckily leclerc has family and friends like robert rover to fund.. but leclerc is GONE.
So by committing a reverse split the company can now bring their price up to .. say.. .75 (with significantly less shares)and then they can do the funding the right way.
A reverse split is not always bad.. most times it is because the CEO's of these nanocap companies are all scammers.
BUT BUT BUT
if new FBCD is legit.. they do a R/S (again because they have to) do a new funding deal POST R/S and then the price grows from there.
I honestly hope that answers... PS I refuse to pay for memebership here.. so I have a few posts left.. would love to answer more
Thanks
Im not one to toot my own horn.. but this may be stick worthy
