I have been digging in the SEC database this week, looking at going private transactions announced this year. One thing that caught my eye was that China Mass Media is far from the only Chinese company that intends to go private. But what I was interested in was trying to find companies that intended to use a reverse stock split to reduce the shareholder count. This allows the company to delist and save money related to SEC reporting and compliance requirements, a burden that can be significant for small companies. In order to reduce the share count small shareholders are forced to cash out at a premium, creating a potential opportunity for small investors.
Unfortunately it seems relatively uncommon for companies to delist using a reverse split. I found just two companies that are currently in the process of doing this. Fortune Industries (FFI) is offering shareholders who own 500 or less shares a per share amount of $0.61 while the shares are currently trading at $0.145. This could be an opportunity to make $233, but I’m far from certain that shareholders who bought after the announcement of the offer are eligible. See this discussion at Oddball Stocks for more information. I bought some shares anyway to see what happens.
The second going private transaction is Helix Biomedix (HXBM). They are offering shareholders who own 299 or less shares the possibility to cash out at $0.60 while the stock is currently trading at $0.24 for a potential $108 profit. I do believe new shareholders are eligible for this offer, but to be clear: this is the first time I’m participating in a transaction like this. At least I’m not the only one thinking this given the frequent transactions with a 299 size.
Long FFI and HXBM