Friday, August 03, 2018 10:31:46 AM
The current share structure is not terrible, it just doesn't provide for a reverse merger. Reverse splits (different from reverse mergers) are almost always bad, but this isn't a regular reverse split as much as it is an exchange of pretty worthless shares for shares in a real company. Reverse splits are generally bad because the company who RS's generally needs shares to sell into the market, so everyone knows dilution will soon take place. Here, our situation is so much different.
What is happening is a private company that is purported to be profitable, wants to buy out mPhase. How much will they pay shareholders? They will pay them in shares of a profitable company that is ready to expand shortly after the purchase. What will it cost us? Likely 50 of our shares (currently at .0002/share) in exchange for one share of the new company. What if they wanted 500:1? The current market cap doesn't change (our actual value), but each of our fewer shares would be worth that much more.
This process is called a reverse merger. It will be a completely different company, owned by completely different people, producing a completely different product. This is similar to an IPO without the cost of hiring an investment banker to register with the SEC, promote the new company, and take a small fortune for their time and effort.
Risk assessment... If someone came to me and said that a private non-ferrous metal company based in the US wanted to go public, was making a profit, and planned on buying out it's Chinese parent company within the next 6 months, I would be interested in pricing their shares. If someone told me that I could buy a single share for .01 (assuming that the company will do a 50:1 exchange - hell - .10/share if they do a 500:1 exchange) BEFORE the market accurately priced the stock, I would load up on shares.
And I did.
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