This isn’t a contest, this is what the market is offering you! Phoenix Footwear Group (PXG) wants to go private. In so doing, it needs to shed some shareholders. As such, it plans to conduct a 1-for-200 reverse-split, followed by a 200-for-1 split. In the process, it will pay cash to shareholders who own less than 200 shares.
Phoenix Footwear currently trades at 25 cents per share, but the company will pay out 75 cents per share to shareholders owning less than 200 shares. This means the shareholder has to spend $50 to get a payout of $150, for a profit of $100. A few months ago, we saw Boss Holdings (BSHI) do something very similar.
In so doing, the company hopes to get down to less than 300 shareholders. This would allow the company to cease its registration with the SEC, and therefore save a bunch of annual operating costs. As the company trades for just $2 million, the costs associated with registration are rather onerous.
It should be noted, however, that the shareholders still have to approve this plan. They will vote on it in late January at the annual shareholder meeting. Furthermore, shareholders may have to get their brokers to change the shares from being held in “street name” to their own names in order to participate in the payout. If you plan to participate, you should talk to your broker about how your shares will be treated.
Disclosure: None
