In My Humble Opinion
The recent announcement has certainly stirred up a hornet’s nest among the group on this board. So, with Epi-pen in hand, I’d like to offer my thoughts and opinions.
There will be a reverse split 1:100 ASX or 1:5 ADR, the financial effect on current shareholders on the day the transaction is finalized is zero. Instead of having 5 one ounce pieces of pie , you now have 1 five ounce piece. What will matter is what happens from there. Some would lead you to believe that management will act irresponsibly and screw shareholders in unimaginable positions. Others are worried about having fewer shares and their perception of a reverse split. The vast majority of R/s’s end up unfavorably for existing shareholders but that in not always the case. Most are done to avoid delisting for a company that is in financial difficulty
As that does not appear to be the case with Avita, then why?
Right Sizing
A decrease in outstanding shares from 2B to 20M puts it in the realm of biotechs of similar size and valuation.
It will be much easier to measure performance and progress. Suppose over time the company continues to execute and make a $2 million bottom line profit. Profitability is measured by earnings per share, most commonly. With a 2B float that translates to .001 or 1/10 of a cent per share. Under the new structure in equates to 0.10/share. This gives a much clearer picture of a biotech going from a losing company to a profitable one.
Currently, the company’s 2B float probably is more a detriment in attracting new investors, be they individuals or institutions.
Everyone has to make their own decisions based on the facts as they see them. There was angst about the capital raise which turned out to be well timed. There are varying management conspiracy theories but, thus far, I’ve found the leaders to be responsible.
Off topic: Why are so many posts being deleted. I hope not because they are negative about Avita. Let the blowhards blow.
