OCOM: reverse split tomorrow
OCOM is a genuinely broken stock. Previous history of toxic convertibles, but none in play now. The co. is out of cash. Stock at 25/32. Market cap is $4.8 M.
Tomorrow a.m. a reverse split will take effect, 1:7, corresponding to a post-split 5 1/2, so the stock may very well open above 5.
quote.yahoo.com
The reason for the split is that they found somebody to do a secondary offering, and the primary thing that the underwriter (Southeast Research Partners) wants is a stock price around 7.
Best case scenario: the secondary comes off and they stay in business, with a massively increased float. Worst case: the secondary fails and the co. goes broke very soon.
I asked the co. what factors could cause the investment banker to back out of the placement, and I was told the main thing is whether the stock falls far below their $7 target. It already is down to 5 1/2 post split, and if the stock tanks badly after the reverse split, which often happens, then they are toast.
Southeast Research Partners is a low-quality investment banker. As an example, one of their analysts, Hank Powell, has had a buy on PNDA for a couple of years, and that stock is now delisted and below $1. See it here:
crn.com
BTW, the co. issued a news release announcing the split would be effective April 14. I called IR today, and was told that it will actually happen tomorrow morning. |
