Category: Reverse Stock Split Cash Out
Current Price: $1.12 as of 9/25/20
Expected Price: $1.48 per share
Max Size (for odd lot): 999 shares
Expected Timing: 4th Quarter, 2020
Profit Potential: $359.64 as of 9/25/20
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Westell is attempting to limit the number of shareholders by cashing all shareholders under 1000 shares out at a price of $1.48 a share (Press Release). The reason the company is doing this is to decrease the total number of shareholders below 300, so that they don’t have to file documents with the SEC. This presents an opportunity for small investors to take advantage of the large premium rate (+32%) that the company is willing to pay to small shareholders.
The main risk of this investment is that Westell could potentially cancel the reverse split and buy out. They could also amend the price of $1.48 that was originally set. While this is unlikely to happen, you still need to be aware of the risks of any given trade. This is similar to another successful trade that I made previously in Parker Drilling, which resulted in a 50% return.
Press release: https://www.sec.gov/Archives/edgar/data/1002135/000100213520000030/exhibit991pr.htm
Most important excerpt:
At the Company’s 2020 Annual Meeting of Stockholders, the Company’s stockholders of record will vote on amendments to the Company’s Amended and Restated Certificate of Incorporation to effect a 1-for-1,000 reverse stock split of the Company’s Class A Common Stock and Class B Common Stock, both with a par value $0.01 per share (collectively referred to herein as the “common stock”) (the “Reverse Stock Split”), followed immediately by a 1,000-for-1 forward stock split of our common stock (the “Forward Stock Split,” and together with the Reverse Stock Split, the “Transaction”). Stockholders owning fewer than 1,000 shares of Class A Common Stock or Class B Common Stock immediately prior to the effective time of the Reverse Stock Split (“Cashed Out Stockholders”) will receive $1.48 in cash, without interest, for each share held at the effective time of the Reverse Stock Split and they will no longer be stockholders of the Company. Stockholders who own 1,000 or more shares of Class A Common Stock or Class B Common Stock immediately prior to the effective time (the “Continuing Stockholders”) will not be entitled to receive any cash for their fractional share interests resulting from the Reverse Stock Split, if any. The Forward Stock Split that will immediately follow the Reverse Stock Split will convert whole shares and fractional share interests held by the Continuing Stockholders into the same number of shares of the Company’s Class A Common Stock and Class B Common Stock they held immediately before the effective time. As a result, the total number of shares of the Company’s Class A Common Stock and Class B Common Stock by a Continuing Stockholder will not change.
The primary purpose of the Transaction is to enable the Company to reduce the number of record holders of its Class A Common Stock below 300. The Transaction is being undertaken as part of the Company’s plan to terminate the registration of the Company’s Class A Common Stock under Section 12(g) of the Exchange Act and suspend the Company’s duty to file periodic reports and other information with the SEC under Section 13(a) thereunder, and to delist the Company’s Class A Common Stock from the NASDAQ Capital Market.
Teeny Trader 