Friday, December 23, 2011

Reverse Stock Split

On December 22nd, 2011, Microvision filed a PRE 14A, which paves the way for a potential reverse stock split. Microvisions has stated several benefits if a reverse stock split is approved. Microvision is currently at risk of being delisted from the NASDAQ exchange due to being unable to maintain a stock price above $1 for an extended period of time. Maintaining a listing on the NASDAQ is essential if the company wishes to pursue further financing options and could be potentially detrimental. If a reverse split is approved the stock would meet NASDAQ's requirements. Secondly, the current stock price at its current level is not appealing to both institutional and public investors. Stocks which trade at less than $1 are considered "penny stocks" and are typical avoided by research firms, institutional investors, and brokerage firms. Microvision stated that a reverse stock split "may encourage further interest in our common stock". If a reverse stock is approved, The Board of Directors reserves the right to abandon the split. A meeting will take place at the Marriott Redmond Town Center in Redmond, Washington on February 16, 2012. All shareholders as of December 27th, 2011, will have the right to vote on the reverse stock split.

What is my opinion on the reverse stock split?

I agree with Microvisions on several fronts. First, a complete delisting of Microvisions stock from the NASDAQ exchange would be both detrimental for shareholders and Microvision as a whole.  According to the  NASDAQ compliance letter, the stock price must exceed $1 for 10 consecutive trading days before April 23rd, 2012. The current stock price must also increase to a level well over $1 because its "Penny Stock" status is seen as too risky for most investors and is off the radar for institutional investors. However, the reverse stock split can also be viewed as a backup plan if the stock price does not see a significant rise in the near future.

The Consumer Electronic Show takes place on January 10th -13th and if Microvision can embrace and utilized the media exposure by showcasing their vast selection of ground breaking products such as the 720P HD Projector, Project Tuatara (Gaming Gun), Pioneers HUD, Microvision Arrow etc, we could see a significant change to the share price in a very short term. There is also speculation that Microvision may unveil a new prototype device with an embedded projector. Microvision must maintain the momentum generated by CES and cannot be seen as a "All Show and No Go" company. Along with the increase in media attention, Microvision must take this opportunity to announce specific guidelines on commercial production of the direct green laser, detailed partnerships, and product orders.