Per RDGL advisor George Sharp, RS explanation
So now we come to the reverse split.
Right now, there is approximately 2 billion shares issued and outstanding on a fully diluted basis. What's worse is that there is still about 500 million shares in the hands of the toxic lenders just waiting to be dumped. That only adds to the pressure on the share price. It is not the business model of toxic lenders to invest in companies, but to take advantage of those in dire straits and flip a quick profit. It is a testament to the accomplishments and future prospects of Vivos that the toxic lenders were prepared to negotiate a set price conversion of their debt to stock. This is unheard of within the penny stock market.
Vivos needs $5 million this year to continue development of RadioGel/IsoPet, open new clinics, and so on. To raise this money under the current share structure would require the issuance of at least 3 billion (restricted) new shares. Probably more. And then the share price would never get anywhere.
In order to get funding under more beneficial terms, Vivos needs to reduce the liquidity of the stock. This is going to require a reverse split. We spent weeks discussing this, as nobody wanted to subject the loyal retail shareholders (we don't care about flippers), to a reverse split. Then we agreed to the one for eight ratio because it would enable the shareholders to maintain a holding in the company, while reducing the selling pressure. In this way, the toxic lenders would be left with something over 60 million shares to sell, while limiting their selling to less than 10 million shares per month, a number that is more easily absorbed into the market.
Everyone knows that I hate reverse splits. But this is one that I believe will ultimately benefit the shareholders, because I believe that the share price will be better able to rise in the near term, and because Vivos will be able to obtain more equity funding under better terms. This is not a reverse split that wipes out the shareholders like many penny stock scams execute for the singular purpose of defrauding the public under a wash-rinse-repeat scenario (see my previous posts on CXBS).
This is a reverse split that keeps the shareholders well-being in mind. And for the record, the funders that provided the approximately $750,000 Vivos needed last autumn in exchange for stock that is restricted for one year, all pre-approved the reverse split. I insisted that we receive their approval because I felt it was unfair not to give them a voice on this course of action just three months after we took their money.
Issuing shares for financing is the cost of doing business. There isn't a public company out there, including the big companies, that doesn't dilute their stock in the name of progress, sometimes for acqusisitions, sometimes as compensation. This is why the A/S was not reduced by the same ratio as the O/S. At the end of the day, hopefully, the shareholder is left with a smaller piece of a bigger pie. As for finding development partners to take on some of the cost for a piece of ownership, that is indeed in the plan, once RadioGel/IsoPet have crossed certain thresholds.
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