Decision Diagnostics Corp (DECN)

[loanranger]

"Mathematically you were correct.
And mathematically, reverse/forward splits have no impact on the value of shareholder's investment in the company."

You are correct as well. So is Scoop when he points out that they don't occur in a vacuum.

Typically a reverse split is executed in one of, or a combination of, the following circumstances, especially in small caps:
1. The share price has drifted down to the point where it raises questions in the market as to the company's operations.
2. The number of shares outstanding is approaching the authorized limit and management doesn't want to increase the authorization. The RS, by reducing the shares outstanding, allows them to issue shares as long as the share authorization isn't reduced in the same ratio.
3. In order to either secure an exchange listing or maintain one when the share price is below exchange limits.


I didn't go back to the split from 2006, but here were the circumstances surrounding the Q4 2011 split:
There were about 117M shares outstanding as of the end of Q3 2011 and the share authorization was 1,750,000, so there was no constraint provided by the authorization to issuing shares.
I could not find share prices before December of 2011 but the pre-split prices in that month ranged from $.017 to .034. I don't know about you, but I don't find those prices as raw numbers to be inspiring (I don't own any issues in that range) and by themselves they might justify an RS. It's hard to find a company that has broad market support that sells for less than a nickel. Feel free to provide a couple examples.
The company announced its reasons in a press release on 12/6/11, when it announced the 10% share dividend:
"Our actions follow the previously announced 1 for 14 reverse split, effective December 1, 2011. These changes the company's capital structure are part of an effort to qualify to have our common stock to be listed on a national exchange, with the goal of applying to the NASDAQ Bx exchange early in 2012."

I don't know if they ever filed that application, but I'm pretty certain that they never joined the "NASDAQ Bx exchange". They did reduce the common share authorization, but not by a factor of 14...more like a factor of less than 4...to the level it is at today. So there are 495M authorized and 75M issued....plenty of room left.


The post split share price was about twice what it is today. Said another way, a share sells today for around half of what it sold for then. More specifically, the price range during the January following the split was $.18 to .50 (again, those numbers are post-split, so they are comparable to current prices).

So without getting bogged down in a discussion of who thinks what about reverse splits, it is an inarguable fact that this company's share price is significantly lower than it was at the time of its last reverse split, about 5 years ago. That's not to say that the reverse split caused the share price to fall. It is fair to say, however, that companies that undergo reverse splits do so because their operations have not created the reaction in the market that would move the share price to where the company wants to see it. It is also fair to say that a reverse split SHOULD make the share price itself a more marketable one.

The next reverse split is likely to be made for the same reasons. Exchange listing, yadda yadda yadda......bad, bad, bad.