Shareholders in Onconova Therapeutics Inc. (NASDAQ: ONTX) recently moved to limit the room for dilution of the company’s shares in the future. At the company’s 2016 annual meeting, shareholders voted to shrink authorized shares to 25 million from 75 million. The move followed a vote that gave the management the green light to perform a 1-for-10 reverse split of Onconova’s shares.
Because the reverse split will reduce Onconova Therapeutics Inc. (NASDAQ: ONTX)’s outstanding shares, leaving authorized share count at 75 million would have left an enormous room for stock dilution.
What about the reverse split?
Given that Onconova’s share price has fallen below the NASDAQ minimum bid price of $1, the management needed to do something to regain compliance. After exploring various option, reverse splitting the stock seemed to be the most immediate and viable remediation to the problem. When shareholders were asked to weigh in on the matter, they recommended split in the ratio of 1-for-8 to 1-for-12. With that, the management in its own wisdom settled for a 1-for-10 reverse split.
1 share for every 10 held
As such, shareholders of Onconova Therapeutics Inc. (NASDAQ: ONTX) will get in new share of the company for every 10 shares they own. The value of the new share will be equal to the value of the 10 shares combined. Therefore, the reverse split is not expected to affect the company’s market cap beyond reducing the amount of shares in circulation and raising the share price of the stock.
No Fractional shares for Onconova Therapeutics Inc. (NASDAQ: ONTX) shareholders
The management clarified that no fractional shares will be issued. As such, shareholders whose holdings are not evenly divisible by 10 will get their fractional shares rounded off to the nearest whole number.
Approval of accountant
Onconova Therapeutics Inc. (NASDAQ: ONTX)’s 2016 annual meeting also saw shareholders vote to ratify Ernst & Young LLP as the company’s independent public accountant for fiscal 2016.
Onconova Therapeutics Inc (NASDAQ: ONTX) generated 1Q2016 revenue of $1.5 million and a net loss of $7.2 million.