Wednesday, May 07, 2014 12:16:34 PM
Think about it.... A company like this currently has say 40% or more of its shares in the public float (I'm guessing on that number). When the new company backs into it, they start off owning only 60%. If they are going to issue shares to raise money (the only reason anybody goes public to begin with), they will have to issue more shares and dilute themselves further causing the insiders to own collectively less than 40%. (as per this example)
If they did the reverse split simultaneously to the RTO, they would reverse all of us down to nothing and issue new shares to the insiders who would control probably 95% (or more) post reverse and issuance, before issuing shares to raise money and diluting themselves down to maybe 75%. (just an example)
So as I'm reading and I'm optimistic about the DD presented and the merger going through, I'm nervous about the potential reverse split aspect of it. We could all end up loosing 95% of our equity position.
Any comments are welcome.
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