Neovasc (NSDQ:NVCN) said today that it will proceed with plans for a reverse stock split with a ratio of up to 1-for-100, with board members and management urging shareholders to vote for the proposal at an upcoming special meeting.
The Vancouver-based company will vote on the proposition on June 4, according to a recently posted SEC filing, as the company looks to regain compliance with the NASDAQ minimum bid requirement.
Neovasc warned that failure to approve the move could lead to a reduction in the liquidity in trading of its shares, difficulty raising capital from US-based institutional funds and an increase in interest on $28.6 million in outstanding senior secured convertible notes.
“Remaining on the Nasdaq Capital Market is a critical piece of the company’s turnaround strategy. Without reaching a minimum bid price above US $1.00 for a minimum of 10 consecutive days before July 2, 2018, the company may be delisted from the Nasdaq, which would have serious consequences for the company as further outlined in this press release. In short, a vote against a reverse stock split will decrease liquidity for existing shareholders, increase the cost of capital for the company, and significantly worsen the terms of the last financing. With an affirmative vote in hand we will then approach the Nasdaq for an extension to the July 2, 2018 deadline to give us more flexibility on the timing of the reverse split to best meet the needs of the company and the shareholders. Without the affirmative vote for a reverse stock split, we believe it is unlikely we will be granted such an extension. Management believes that it is in the best interest of the company and its stakeholders to remain on the Nasdaq, and that the reverse stock split is the only tool available to get the share price of the company above the minimum US$1.00 bid price before that deadline. As such, the Board and I urge the company’s shareholders to vote “FOR” granting the company the ability to effect a reverse stock split,” prez & CEO Fred Colen said in a press release.
“A reverse stock split is a process by which a company’s shares are effectively consolidated to form a smaller number of proportionally more valuable shares. Despite contrary notions, a reverse stock split has zero economic impact as an independent action. For example, under a 1-for-10 reverse stock split, rather than 100 million shares at US$0.50, a company would have, all else being equal, 10 million shares at US$5.00 at the time of the split. In either case, the market value of the example company is the same before and after,” board chair Paul Geyer said in a prepared release.
Last week, Neovasc saw shares fall after it missed Wall Street expectations and posted growing losses in its first quarter earnings release and announced initial plans for the reverse split.