BLACKROCK Municipal Income TRUST V.BFK.P

RE:RE:RE:R/S is "Proposed"

[quinlash]

Hi Spectra,

Always enjoy seeing you post to the board, so no ill-will here or anything however I wouldn't mind discussing your comment on "us all taking a haircut".  The topic of a reverse split has been on the stock ever since the company was notified by the NYSE that it needed to have a higher shareprice to maintain the NYSE listing.  IMHO it would be safe to say that the company does indeed wish to maintain that listing and will take action if the market does not move the shareprice up over the $1 USD / $1.34 CDN mark to maintain listed however I fail to see how that translates to a haircut.

A reverse split simply means that the number of shares will be reduced and the price for each share will go up.  If an investor coming into the stock with $10,000 at $1 (Keeping the math simple here) that investor will have 10,000 shares.  If the company were to then proceed with the full 8 to 1 R/S as "proposed", that investor will then have 1,250 Shares, each valued at $8.00 for a total investment value of $10,000.  So it doesn't really matter where the shareprice goes between now and when a R/S may take affect, the math is the same, especially for new investors coming in.

With a solution to the NYSE now provided by the company that could actually place the shareprice between 6 and 7 times above the min listing requirement for the NYSE it could also be reasonable to expect that more American investors will warm up to the stock and either not sell or opt to come in with the assurance that the NYSE delisting concern has a solution and a date by which time it will be addressed.

You already stated that you don't like to hear that a R/S is already "baked into" the shareprice, however, fact is, the topic is well known and has been for a long time now.  Difference now is that we have a date and a ratio to comment on.

IMHO this is going to boil down to a few key considerations for investors:

-> Is the company simply doing this to maintain the listing ? 

If the shareprice floats around the $1.00 CDN mark the R/S of 8 puts the shareprice at $8.00 CDN, the listing requirement is $1.00 USD, so that will place the shareprice WELL OVER the minimum listing requirement.  Will new investors coming in be willing to pay $8.00 per share?  Well that will depend on the fundamentals of the company and it is currently trading at less than half of the P/S ratio of Canopy so (based on the sector comparables) the shareprice is already well undervalued.  With less shares out there after a R/S the ratios explode upward to an evaluation that shows the shares are even more undervalued than before.

-> What will happen after the reverse split ?  

Will the company actually achieve it's goal of becoming EBITDA positive no later than first half of Fiscal Year 2021 (aka by Jan 30, 2021 Calendar Year).  The current QTR report places the EBITDA positive gap at just over $3 Million Dollars.  Aurora and Canopy are years away from this yet HEXO is only a few months.  Will the market realize how close HEXO is to beating these other producers to this milestone for profitability ?

Quiet frankly, the whole topic of a R/S is likely more interesting to short term / day traders that come in and go off a stock for small percentage gains. 

Maybe this forum is the wrong one to be posting these comments to.  Maybe most of the readers here are only looking at trading on the day, a week or other relatively short period of time.  For myself I invest longer term (min 1 year / max 5) and trade as necessary with a long term goal in mind.

Anyhow, would like to hear more about this free haircut, my barber is older than I am and his hands shake more than I like these days :)

Enjoy your weekend

Q



Best Regards,

Q





 

Spectra7 wrote:
Q4E, you can stomp your feet and email the company, but it really doesn't matter what you or me...the combined total of all retail investors think. Good time to throw the rose colored glasses in the desk for now. We will all be getting a haircut. Life goes on. Cheers S7