The only reason I can think that this would take place is to try and resist a take over. Generally of a penny stock like this one from a company that is larger with a larger market cap. It's also known as a Shareholder rights plan, it's used to prevent any unwanted, or hostile, acquisitions. With a shareholder rights plan additional shares will be automatically issued to current investors. In the event of a hostile takeover, the purchaser will have to need to pay for investors' original shares as well as the new shares. This will make an acquisition more expensive but not impossible if the buyer is willing to pay an additional price.
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