Upon further reflection
I'm not going to defend the proposed RS. I think it's poorly timed, but a few things to consider:
1. Corbett needs shareholder approval and the time to do it was in conjunction with the shareholder meeting. Doing another proxy solicitation would have been costly and time consuming. Not an excuse, just trying to understand their thinking. They explicitly state the rationale for the R/S is to uplist to Nasdaq. Also, all warrants (including Corbett's) and options outstanding are affected by the R/S. This is different than other R/S that I've seen where the company reverses the outstanding common but gives out post split shares to insiders. Perhaps small consolation for some, but we're all getting treated the same.
2. The balance sheet is in fine shape now with over $7mm in cash and ~$800k in converts that mostly convert at fixed prices well north of the current price.
3. Current enterprise value is ~$4mm. In my view, that's ridiculously low, but the company hasn't issued any meaningful updates in a while. I get why the stock was trading at $0.07 prior to the RS announcement, but thought the stock could easily re-rate to $0.30-$0.40 or higher with updates on the app, kiosks, prepaid cards, payment processing, payroll and other solutions.
4. AS increase could be to accommodate the exercise of the purchase option on Frictionless.
5. We all have the option to vote NO on the R/S and increase in A/S if you so choose.
I expect the stock to bounce some as cooler heads prevail, but management needs to communicate with shareholders now and explain the rationale in greater detail. They also need to generate enthusiasm for the story with meaningful business updates.
