AuthID reaches for daylight with a big reverse stock split, secures a token customer commitment
Nasdaq-listed identity firm authID has opted for a 1-for-8 reverse split of its common stock. The company is trying to stave off delisting with the move.
The theoretical total value of a company choosing a reverse stock split remains the same when it happens, but with time, the fact of the split can move sentiment in the firm.
A reverse split is necessary to ensure compliance with the Nasdaq Capital Market’s minimum bid price rule. Companies face delisting if they cannot maintain shares at $1 or more for at least 30 consecutive days.
AuthID in May said it had raised $8.2 million from the sale of new shares, which diluted share value, and that likely has added to its listing woes.
The firm has announced new customer contracts with an estimated aggregate booked annual recurring revenue, valued at about $239,000, during the quarter ended June 30.
The company reported a loss of $24.2 million, or $0.97 per share, on revenue of $527,000 for fiscal 2022, ended December 31.
In a reverse stock split, shares of a company are merged to form a smaller set of shares based on a predetermined ratio. Each share, now representing a greater stake, is valued more highly than a presplit share.
That higher valuation can be superficially more attractive to some investors, but, often, a reverse split is done to avoid being delisted in an exchange. As such, reverses generally pull share prices down because the market senses weakness.
In a conventional split, stockholders are given additional shares for each one they own, which while individually valued lower, give shareholders a bigger stake. It also increases the company’s liquidity.