Food Innovation

[gfp927z]

>> reverse split <<

Looks like the exact ratio for the reverse split hasn't been announced yet. From the mid-July 8-K -


>>> "Approval of amendments to RBT’s articles of incorporation that would effect a reverse stock split, pursuant to which either five, ten, fifteen, twenty, or twenty-five outstanding shares of our common stock would be combined into one share of such stock, and to authorize our board of directors, at its discretion, to select and file one such amendment which would affect the reverse stock split at one of these five reverse split ratios on or before July 14, 2023, if deemed appropriate." <<<

https://www.sec.gov/ix?doc=/Archives/edgar/data/0001063537/000143774922017427/ribt20220719_8k.htm


Many companies that do reverse splits have blown out share counts, with shares outstanding upwards of 1 bil or more. RIBT doesn't have that problem, with shares outstanding only ~ 52 mil (per Yahoo).

Most of my experience with reverse splits has been with biotech stocks with blown out share counts. In those cases the reverse split, though painful for existing shareholders, is actually beneficial since it gets the share structure back in line, which allows many additional dilutive financings to be done in the future. This is how it works in biotech anyway, where small companies have no revenues, and constantly need to raise funds via issuing more shares, warrants, etc.

But in RIBT's case, a 10 for 1 reverse split would put the share count down to only 5 mil shares outstanding, which could be problematic for larger investors since trading liquidity gets too low.

Another aspect with a reverse split is it can be combined with a financing to raise money, all at the same time. So it gets the pain (for shareholders) out of the way all at once, and puts the company in a good position for the future (blown out share structure fixed, company's coffers replenished, etc).

RIBT doesn't have the blown out share structure problem,
but could use the additional cash. On the downside, the higher share price can make it easier for shorts to pile in. RIBT doesn't have many shorts however (1.2%, per Yahoo), so that may not be an issue, especially with revenues increasing and the new customer wins. Bottom line, the company believes that staying off the OTC/pink sheets makes the reverse split route worth it.

Anyway, GL with RIBT, I'll be pulling for them to succeed. If business increases and revenues surge, that's all that will matter. As Buffett says, in the short term the stock market is a voting machine, but in the long term it functions as a 'weighing machine' :o)





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