Peregrine Pharmaceuticals, Inc. (Nasdaq: PPHM) announced on Friday that its previously announced stock split will take place Monday, Oct. 19. The company's one-for-five split will reduce the number of shares outstanding while increasing each share's price proportionally.
Peregrine's shares will trade under the symbol "PPHM," with the letter "D" added to the end of the trading symbol for 20 days to indicate the reverse stock split has occurred. The symbol will change back to its original symbol "PPHM" on Nov. 16, 2009.
"We believe that our continued listing on the NASDAQ Stock Market is essential to our future success, and we expect that this reverse stock split will enable us to regain compliance with the minimum bid price rule, the only deficiency affecting our continued NASDAQ listing," noted Paul Lytle, CFO of Peregrine. "The 1:5 exchange ratio that was approved by the Board of Directors is the result of both our extensive evaluations of the capital structure of peer companies in Phase II and Phase III clinical trials and the expert advice of a number of highly experienced financial advisors. Based on previous meetings with institutional investors, we also expect the new capital structure will allow us to attract a broader range of investors to our company."
BiomedReports Contributing Columnist Vinny Cassano's Take:
On Monday, PPHM investors will receive one share for every five in their portfolio. The market cap remains the same in a reverse stock split, but because there are a reduced number of shares on the back end of the split, the share price is higher. The value of the shares (as per market cap) remains the same.
That was a brief recap for the new investors who may not be familiar with the reverse split.
Many times a stock price will decline after a reverse split, and that may very well be the case with PPHM. The company has nothing in late stage trials and there is no news pending, that I am aware of, that would boost up the share price post-split, so I am fully expecting a decline next week. I am also expecting that I will continue my accumulation of the stock.
While still in early stages of development, Peregrine's Bavituximab with its tumor fighting capabilities, holds quite a bit of potential in the Oncology market, in my opinion. The company is also developing Cotara to treat patients with "high grade brain cancer".
In addition to using Bavituximab to stimulate the immune system to fight cancerous cells, the product is also being investigated for its effectiveness in fighting various infectious diseases.
Because of the above-outlined potential of Peregrine's products, I will continue accumulating the stock, especially if we see a nice price cut after the reverse split takes effect.
The only event that would make me think twice about continuing my accumulation is if there were bad news from the pipeline released in accordance with the RS. If that were the case I'd have to digest the news and then consider whether or not the stock was still worth accumulating.
If you're investing on the potential of the pipeline, and nothing regarding the pipeline changes, then I think that the RS is a non-factor and my give investors a discounted price to buy.
All just my opinion.
Disclosure: Long PPHM
Vinny Cassano also authors the popular stock investing website VFC's Stock House.
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