Atlantic Sapphire plans reverse share split: What does it mean?

If approved, the rights associated with the current shares will last until May 29, 2024, and the new share structure will come into effect starting May 30, 2024.

Land-based salmon producer Atlantic Sapphire, a company based in Miami, Florida, has announced a proposal for a reverse share split, pending approval at their annual general meeting scheduled for May 23, 2024.

The proposed reverse split ratio is set at 10 old shares for 1 new share, with the intention to consolidate the number of existing shares.

The plan was made public on May 2, 2024, through a stock exchange announcement. If approved, the rights associated with the current shares will last until May 29, 2024, and the new share structure will come into effect starting May 30, 2024. The record date for the reverse split is set for June 3, 2024.

A reverse share split is typically pursued for several reasons:

1. Increase Share Price: It immediately increases the share price by reducing the number of shares outstanding, potentially avoiding delisting from stock exchanges that have minimum price requirements.
2. Improve Market Perception: Higher share prices often attract more institutional investors and improve the overall market perception of the company.
3. Maintain Listing Requirements: It helps maintain compliance with stock exchange listing standards which may have minimum price thresholds.
4. Reduce Volatility: By increasing the share price, the stock’s price volatility may decrease, as higher priced stocks often have less percentage volatility.
5. Optimize Capital Structure: Fewer shares outstanding can simplify aspects of corporate finance management and reporting.

While a reverse share split does not change the company’s fundamental value, it can affect its stock’s marketability and compliance with financial and regulatory standards.

Atlantic Sapphire’s Phase 1 facility is in operation, with the capacity to harvest approximately 10,000 tons (HOG) of salmon annually. The company completed its first commercial harvest in the US in September 2020, and is currently constructing its Phase 2 expansion, which will bring total annual production capacity to 25,000 tons, and has a long-term targeted harvest volume of 220,000 tons.