Amid the market turmoil we’ve seen this year, a number of companies have seen incredible downside pressure. Such is the case for Brickell Biotech (NASDAQ:BBI). As of yesterday, BBI stock was trading down more than 50% on a year-to-date basis, and more than 85% on a one-year basis.
This move toward 12 cents per share yesterday clearly put BBI stock below the $1 per share minimum threshold set by the Nasdaq for its publicly listed companies. Accordingly, investors concerned about a delisting have clearly made their feelings known, with selling pressure for Brickell picking up in recent weeks.
That said, Brickell investors are having one heck of a day today, with BBI stock surging more than 50%. This comes as the company announced a special shareholder meeting to avoid delisting.
Let’s dive into some of the details behind the vote and what this means for investors.
Is BBI Stock a Buy Following Plan to Retain Nasdaq Listing?
This upcoming shareholder meeting, which is expected to take place on June 30, is a big deal for investors in Brickell. A listing on the Nasdaq allows biotechs like Brickell access to public equity when needed. Accordingly, maintaining a listing is of utmost importance to the company and its shareholders.
What will be at issue during this shareholder meeting is just how aggressive of a reverse split to put in place. The company will be deciding to split shares between a 10-for-1 range and a 45-for-1 range. That’s a rather significant range to consider, suggesting the company may need significant wiggle room in this market.
Generally speaking, reverse splits are negative for companies. That’s because reverse splits typically take place to avoid delistings, such as what we’re seeing play out with Brickell. That said, the ability to retain this listing appears more important to shareholders than the effects of the reverse split. Fundamentally, investors will still own the same percentage of the company as before, just fewer shares.
I’m of the view that, all things considered, this is probably a positive for Brickell. The company may need to raise capital in the future. Thus, the company’s Nasdaq listing is likely a positive for shareholders.
That said, today’s impressive rally may ultimately prove overdone. This is a penny stock I think investors should probably watch from the sidelines right now.
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On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.