Westell Technologies, Inc. issued a press release on Friday, July 10, 2020 announcing:
…a Special Committee of independent directors has recommended, and its Board of Directors has approved, a plan for a proposed transaction whereby the Company would effect a reverse/forward stock split of the Company’s shares of Class A Common Stock and Class B Common Stock, in conjunction with terminating the Company’s public company reporting obligations and delisting the Company’s Class A Common Stock from the NASDAQ Capital Market. It is expected that this transaction would be effectuated late in the third quarter or early in the fourth quarter of calendar year 2020, subject to stockholders approving the proposed transaction at the Annual Meeting of Stockholders.
The Company is taking these steps to avoid the substantial cost and expense of being a public reporting company and to focus the Company’s resources on enhancing long-term stockholder value.
More specifically:
The transaction includes a proposed 1-for-1,000 reverse stock split of the Class A Common Stock and Class B Common Stock, in which holders of less than 1,000 shares of the Company’s common stock would be cashed out at a price of $1.48 per share for their fractional shares. Such price represents a premium above the Class A Common Stock’s closing price on July 6, 2020 and is supported by a fairness opinion by Emory & Co., LLC, whom the Special Committee engaged for such purpose. Stockholders owning 1,000 or more shares of the Company’s Class A Common Stock or Class B Common Stock prior to the reverse stock split would remain stockholders in the Company. The number of shares they would own following the proposed transaction would be unchanged, as immediately after the reverse stock split a forward split of 1,000-for-1 would be applied to the continuing stockholders, negating any effects to them.
Item 8.01 Other Events from this 8-K filed with the SEC on July 10, 2020 adds:
The Company believes that the total cash required for the Transaction will be approximately $8.1 million. This amount includes approximately $7.8 million needed to cash out fractional shares, and approximately $300,000 of legal, accounting, and financial advisory fees and other costs to effect the Transaction. This total amount could be larger or smaller depending on, among other things, the number of fractional shares that will be outstanding after the Transaction as a result of purchases, sales and other transfers of our Class A Common Stock and Class B Common Stock of the Company by our stockholders.
Of important note, from the aforementioned press release:
If consummated, the proposed transaction would apply directly only to record holders of the Company’s common stock. Persons who hold shares of common stock in “street name” are encouraged to contact their bank, broker or other nominee for information on how the proposed transaction may affect any shares of the Company’s common stock held for their account.
The Board may also abandon the proposed transaction at any time prior to completion if it believes the proposed transaction is no longer in the best interests of the Company or its stockholders.
The commentary below is courtesy of GrahamianValue.com Contributor Harry Sauers (website, resume):
$1.48 is still at a discount to last quarter’s NCAV; while the company may have burned though some cash, here's the figures I have below —
Last 10-Q:
Cash: $20.87 million
Receivables: $4.0 million
Inventory: $6.80 million
Total liabilities: $5.87 million
Shares outstanding: 15.5 million
NCAV/PS: $1.66Pro forma of reverse split/re-split:
Cash: $12.77 million
Receivables: $4.0 million
Inventory: $6.80 million
Total liabilities: $5.87 million
Shares outstanding: ~10 million
NCAV/PS: $1.77This comes with the obvious caveat of a lower quality NCAV composition and does not include the cash burn they may have incurred in the past Q, which is likely north of a million dollars.
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