NXT-ID Inc (NASDAQ: NXTD) is screaming for the top in the market this morning after results from a shareholder vote were made available. Based on the results, and messages across social investing networks, such as Stocktwits, investors are excited about the fact that the reverse split proposal was shot down.
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NXTD Stock Roars For The Top On Rejected RS
Recently, NXT-ID held a vote on multiple subjects. However, the hottest topic of them all was a potential reverse stock split. Essentially, the company is in danger of being delisted from the Nasdaq if it can’t get its price per share over $1. To do so, the company intended on moving forward with a reverse stock split.
In the vote, investors shot the idea of a reverse stock split down.
There are many reasons investors may have wanted to avoid a reverse split. While the move is largely cosmetic, an RS would have increased the price and given the company a stronger ability to raise funds through dilutive offerings. In fact, if the RS were to take place, it’s all but guaranteed that NXTD would have moved forward with a dilutive offering.
What A Rejected Reverse Split Means
While investors are rejoicing about the fact that the reverse split was rejected because a dillutive offering is likely off of the table, at least for now, it’s not necessarilly good news. The fact that investors rejected the NXTD reverse split has a couple of major implications.
Most importantly, NXT-ID will need to find some way to cure its compliance issues with the NASDAQ. If it is unable to cure its compliance issues, it will be booted from the major exchange, destined to trade on the OTC.
That’s bad news for investors.
OTC stocks are known to come with high levels of risk, which leads to a lack of liquidity among them. So, while there’s not likely an offering on the horizon, it is likely that once the excitement dies down and reality sets in, NXTD stock will see serious declines.
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The Bottom Line
Prior to the vote, NXT-ID was stuck between a rock and a hard place. The vote didn’t solve that issue. Ultimately, NXTD is still a struggling company, and now, it’s facing delisting from the NASDAQ. Should this take place, there will be quite a few bag holders. You don’t want to be one of them.
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