From Chris Temple CORNERSTONE’S CONSOLIDATION
This proposed share consolidation, Chris, is scaring the folks...and me, and as I have never been in one that had a positive effect on the company’s shares who did a consolidation. What's your take, please? ... Stocks with no earnings and all promise seldom benefit from consolidation. Instead of increasing the liquidity the opposite can occur...
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Your point is well taken: companies with little near-term prospects/fundamentals/shareholder enthusiasm that do so-called “reverse splits” usually end up no better off. That’s happened with the likes of Encanto Potash and ValOre Metals. On the other hand, when there are positive things going on otherwise, a consolidation can do a lot of good. A few years back that was the story with Anavex Life Sciences; AVXL did a consolidation as part of an uplisting AND as good clinical news was coming out. As a result, AVXL shares went from 20-some cents each, to still under a buck post-consolidation, to as high as $14/share within several months afterward.
Summing it up in the press release, management says, “The expected benefits of the Share Consolidation include increased investor interest, improved trading liquidity and reduced price volatility.” The higher price and better share structure open up Cornerstone, if this is implemented, to more institutional hands. And since this is already a high-profile story...with a world-class asset...and then some, this consolidation is certainly not being done from a position of fundamental weakness.
Also, this move and a higher share price would make CGP shares marginable. Though—as evidenced by their stand against SolGold’s low-ball offer—the company’s major shareholders are in this for the long haul and aren’t going anywhere, such a move would allow them at least to have some flexibility, via that marginability, for their CGP shares while we all wait for a greater monetization event (likely, a buyout of at least CGP’s Cascabel-related interest) down the road.
https://files.constantcontact.com/8155425f301/37d02304-d347-413b-af36-fe3c96faeaea.pdf