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Great Basin Scientific: How $3.23 Equals $14,700


Two reverse splits and a de-listing letter have crippled the stock.

Liquidity concerns raise doubts regarding the viability of the company.

Short sellers smell blood.

Great Basin Scientific (NASDAQ:GBSN)

is not (and has never been) a common name when talking about well performing stocks.

Unlike most companies that have had a 99.999% drop in their stock price, GBSN has sales of actual products and has a large staff of full-time employees and has actual FDA approvals for their equipment. It is worth mentioning at this time that GBSN is not a start-up drug company. They manufacture FDA approved testing platforms for drugs. So what is going on with the stock?

A History of Great Basin's Stock

Great Basin commenced their Initial Public Offering on October 8, 2014. Per the company's 2014 SEC Annual Report filing: "On October 8, 2014, the SEC declared effective our initial public offering registration statement on Form S-1 (File No. 333-197954) related to 1,150,000 shares of common stock and 1,150,000 Series A Warrants, which were sold in combinations of one share of common stock and one Series A Warrant at a public offering price of $7.00 per unit. Each Series A Warrant is exercisable for one share of common stock and one Series B Warrant. In addition, the managing underwriter, Dawson James Securities, Inc. exercised its option to purchase 172,500 Series A Warrants."

From the humble beginnings of that 1.15 million share public offering GBSN went on an unprecedented dilution spree. In December 2015 a 1:60 reverse split was effected. Subsequently, just four months later in March 2016 a 1:35 reverse split was effected. Adjusted for these two splits the IPO shares have fallen from $14,700 a share to the current $3.23 at the close of trading April 21, 2016, despite trading on the NASD CM platform. So lets examine how that transpired.

So what led to the free fall in the stock price? Thanks to warrants offerings and conversions the company issued shares at a pace that was similar to the pace of water falling from Niagara Falls.

Management has been forthright regarding the dilution and the need for it to change in the future. In the most recent press release where the company discussed their results they stated: "As we've outlined in two recent press releases, we are preparing our plan for returning to compliance, continuing compliance with Nasdaq rules on the market value of listed securities. And we are very optimistic that we will be granted the extension we need to regain compliance. The plan for returning to compliance is also the same as the plan for simplifying our capital structure. And over the past four months, we have made significant progress in reducing those risks as well. We eliminated the highly dilutive series C warrants. We have also eliminated the series E warrants at a significantly reduced level of dilution than we would have faced at a later date. And our...