PositiveID Corp (OTCMKTS:PSIDD) Performs A 150 Reverse Split
tags: PSID
On July 5 a 1-for-50 reverse split of PositiveID Corp (OTCMKTS:PSID)’s outstanding common stock became effective. The split drastically reduced the O/S of the company from 840 million shares to around 17 million. The share price of the company’s stock was pushed from deep in the double-zero price ranges to a July 5 opening price of 23 cents per share.
On the day of the split PSID crashed hard wiping over 27% of their value and dropping down to a close at $0.17. The severe crash was followed by two sessions of recovery that saw the ticker climb its way back up to $0.22 at the end of Thursday’s session. On Friday the positive momentum disappeared completely and PSID suffered another painful plunge down the chart closing 22% in the red at $0.171.
The extreme volatility of the ticker is not that surprising. On one hand PSID is a real company with real operations and growing revenues. In fact, for the first quarter of the year it reported revenues of over $1.66 million compared to just $131 thousand at the end of the same period in 2015. However, even after such an impressive achievement PSID‘s financial state didn’t improve by much. At the end of March 2016 the company had just $262 thousand in cash, a working capital deficit of over $10 million and a net loss of nearly $4 million.
An even bigger red flag, and the most likely reason for the reverse split, is the devastating dilution of the common stock. Between January 1 and May 6 PSID issued over 120 million shares as a conversion of debt, bringing their outstanding shares to 564 million as of May 6. If you scroll back to the start of the session you will see that right before the split the company had 840 million outstanding shares, which means that in the span of just two months another 280 million shares had seen the light of day.
If the printing presses of the company continue to churn out fresh shares at the same rate PSID might soon find itself wiping even more of its post-split share price. And this may indeed be the case – the company is selling more and more convertible debt. In the latest 8-K filing alongside the reverse split PSID also announced new securities purchase agreements totaling $516 thousand and $132 thousand, respectively. These newly sold notes could potentially be turned into common shares at a 37.5% discount.
PSID should be approached with caution. Do extensive due diligence, set appropriate time horizons for your trades and never put unaffordable sums of money on the line.
