Avid Bioservices Inc (CDMO)

[MobyInvestor]

"so in fact, our equity position has not changed"

The only thing that doesn't change after an R/S is your cost basis, the total amount you paid for those shares.

What does change is your leverage. And there's only two ways you can get that back. Either by buying more shares or by the company being sold for roughly the same market cap as might have been in the past.

If we used the $11/share figure that's in the poison pill as a reference then in order to be made "whole" after going through a 1:10 reverse split Tustin would have to land a deal resulting in $110/share.

Forgetting that and assuming that the company doesn't go down the tubes the real downside to an R/S if you're existing shareholder is the loss in leverage.

PCLN's a great example. By the time PCLN did a 1:6 R/S the stock had lost 97% of it's value. Today, it's trading over 400% higher but that is still over 85% off of it's all-time high.

So, while anyone who invested in PCLN after the R/S did well there's a lot of existing shareholders that are still under water today, after a 400% increase, if they didn't average down.

It's all about the leverage.

Regards,

moby