Chalice Brands Ltd CHALF

Reverse Splits - A discussion

[daveinvestor]

Many of you seem very concerned with this upcoming event. I am not going to tell you what to do and have always encouraged you to draw your own conclusions. If the coming reverse split does not sit well with you, I most certainly can acknowledge your concern. If you feel this isn’t for you, by all means exit. No one is forcing you stay and continue with the risk. Investment always means risk and how much you’re willing to incur.

I will encourage everyone to read up on all the different professional opinions on reverse splits. For example:
https://www.timothysykes.com/blog/reverse-split/

Sykes lays out both pros and cons of such an action. I am not going to go into the cons, but they are there for everyone to read and decide whether they are applicable from their point of view. I tend to side more with the pros of this reverse split. Specifically, these positive points:

1.) Reverse splits aren’t always bad — it depends on the company and why it’s doing a split. But it’s smart to know what a reverse split is and why most penny stocks do them.
 
2.) Reverse stock splits basically mean nothing for an investor because the position value in the company doesn’t change. It just means owning fewer shares at a higher price.
Reverse stock splits basically mean nothing for an investor because the position value in the company doesn’t change. It just means owning fewer shares at a higher price.

3.) But a penny stock with a price of 50 cents per share probably isn’t as financially stable. In fact, the company might need to raise money through public offerings. But public offerings for penny stocks are usually toxic and almost always end horribly.
Large investors don’t want to invest in a company with a low share price with tons of tradable shares — it makes it harder for their investment to ever make money.

4.) Here’s an example … One requirement to stay listed on Nasdaq is that the company’s stock price has to be above $1. The following is taken from a letter from the SEC to Accentia Biopharmaceuticals, Inc. (NASDAQ: ABPI) regarding its stock price back in 2008:

I think GLH is doing all of the above. Their cash flow is undeniably going in the right direction. In order to prepare for the future, the company must become more appealing to larger institutional investors. It should also prepare now should full legalization occur, to list on a more reputable exchange other than the CSE.  The amount of money flowing into the sector has dropped significantly since the end of February. Larger investors are waiting for more news and other catalyst events. 

Again, the choice is yours, the company has laid out their plans, and you’re either in agreement with that or you’re not. Make an informed decision. There is a myriad of resources at your disposal in order to make your decision process easier.