QUESTION
- The questions I have are related to the share structure and Frankfurt listing. Firstly, I continue to hear on certain blogs that a reverse split is imminent. I don’t see the share structure as being anywhere near that type of needed corporate action. What are your thoughts? Also, will our Frankfurt listing problem ever be resolved so we can again be listed?
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ANSWER
A reverse split which is used only for the purpose of increasing share price is not sensible if the underlying circumstances of a company have not changed. In such a scenario, the share price is likely to drift down again, if that was the preceding trend.
A reverse split which is accompanied by a significant development which requires it, or calls for it, is widely accepted to be appropriate. One example of this would be to gain listing on an accredited stock exchange. There are many stock exchanges in the world – they have differing requirements. Today, a firm can be listed on more than one easier than in the past because of the growing policy to recognize listings as being substantially equivalent, thus easing the application for dual or multiple listing. The NYSE and NASDAQ are certainly not the only options for a company today – and are in fact not suitable for many companies for a variety of reasons.
Winning Brands has commenced planning, with qualified U.S. securities counsel, for official SEC registration. However, the outcome of the process is not guaranteed because the SEC makes its determination in each case individually. Therefore, the planning that I am referring to involves meticulous preparation of all materials required for review, and appropriate financial preparation for the end of access to Regulation D, Rule 504 financing. This registration-exempt financing ceases to be available for companies registered with the SEC, whereas other forms of financing become available, and is generally less expensive with regard to the risk discount. Winning Brands has advanced enough to make SEC registration a serious consideration at this stage because the company already provides the majority of information and performs substantially similar filings to those required of a registered company. Even prior to an exchange listing being chosen, the company would probably rise to OTCBB following registration.
As to Frankfurt, the listing change affecting Winning Brands affected over 1,000 companies that were dual quoted, as we were. Frankfurt made it more difficult for listing sponsors to perform that task because of new obligations that sponsors faced on the bid side of the equation. At this moment in time, the most likely route to regaining Frankfurt will be to completing the SEC Registration and finding a suitable exchange on which to become listed, thus possibly regaining Frankfurt on a renewed dual listing basis. There are possibly suitable Canadian exchanges that should not be overlooked, that all U.S. trading accounts would work with seamlessly.
There is no legal obligation, or even practical reason, to carryout a reverse split at this time. When it becomes apparent that the company’s sales will rise considerably and profitability can be attained, it would be normal for a significant positive impact on the market capitalization and share price to occur. A profitable company can repurchase shares and reverse its dilution, however this is not usually seen at the entry level of the public markets where management culture is not as dedicated to the interests of common shareholders as it could/should be. Winning Brands has, by contrast, demonstrated exceptional disclosure and responsibility in its business plan description, implementation, verification and potential. Ultimately, getting the job done is what will have the most bearing on share price – regardless of where the shares trade and how many of them there are.
