Maybe expecting such response, on Wednesday some of the sellers rushed to get the sold shares back and let the price jump 37.25% up. LFBG closed the session at $0.007 for a share on a trading volume of 153.27 million shares. The concerned inquiries of traders that provoked the filed CEO Update were obviously related to the impressive number of outstanding common shares of Left Behind Games.
On Tuesday, Left Behind Games announced that they will reduce this number from 4.45 billion to 2.67 billion through a 5-for-3 reverse stock split in January next year. It seems like the fact that the $3 billion shares outstanding at the end of June have kept growing with uncontrollable rates and are now 4.45 billion was not a pleasant surprise for many traders. The initially positive reaction to the latest financial results disappeared very quickly, driving the share price below $0.005.
In support of the reverse stock split, the CEO arguments with the company’s objective to list its stock on a national exchange, which requires a share price of above $3. Thus, the number of shares outstanding has to be reduced because with the current count that would require a not “practical” $13 billion market cap for LFBG.
“Practical” does not sound like the right word, but also taking the market cap as starting point for the calculations instead of the fundamentals of the company makes it look like the CEO is trying to adjust the number of shares to some market cap value, instead of explain for example how the sales of the company, or its $1.55 stockholders’ deficit, correspond to the current $31 market cap.
In the three months ended September 2010, the business of Left Behind Games has not become profitable yet. The auditors of the company are still doubtful on its ability to continue as a going concern. Furthermore, the company states that it is addressing the enormous liquidity problems “by continually seeking investment capital through the public markets, specifically, through private placements of common stock and debt”.
