Titan Pharmaceuticals, Inc. (NASDAQ: TTNP) is hitting my radar in the wee hours this morning. My wife wants me up in an hour and a half for Black Friday shopping on a Saturday morning, but that’s neither here nor there. In order to stay awake, I decided to dig into search volume and see what you, my valued audience is searching for.
To my surprise, TTNP stock was making the top of the list. It seems as though the vast majority of these searches have to do with a potential reverse stock split. So, I dug in for the past few hours and here’s what I came up with.
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A TTNP Reverse Stock Split Isn’t Likely
Early this year, Titan Pharmaceuticals announced that it would hold a vote to move forward with a 1-for-4 to 1-for-10 reverse stock split. In March, voters shot that idea down, voting against a reverse split.
This put TTNP in a bit of a situation. The company is facing delisting from the Nasdaq if it can’t get its price above $1 per share, and it was banking on the reverse split to make that happen. As a result, TTNP is hoping to get the reverse split passed with a vote that will end on November 16, 2020. However, based on the previous vote results, there’s a strong chance of another rejection from investors.
So, for those of you wondering when the TTNP reverse stock split is, well, it’s probably not going to happen, at least not in the short term.
Why Shareholders Voted Against the Reverse Split
The fact of the matter is that a reverse split isn’t always a great thing, and I can’t blame Titan Pharmaceuticals shareholders for voting against it. Time and time again, companies see dramatic declines and move forward with reverse stock splits. These splits allow these companies to continue to raise money, ultimately at the expense of their shareholders.
Ultimately, it seems as though TTNP shareholders decided to make management get more creative. While rejecting the reverse stock split means a continued risk of delisting from the Nasdaq, investors seem to see that as the lesser of two evils when compared to a reverse stock split that would likely exacerbate the bleeding. So, it’s not surprising to see that investors rejected the transaction.
What Happens if TTNP Is Delisted?
In short, if Titan Pharmaceuticals is delisted from the Nasdaq, significant declines will likely be the result. The fact of the matter is that OTC stocks lack liquidity, and therefore, demand for them is minimal. Moreover, losing its status as a Nasdaq-listed stock means that fund managers don’t need to purchase the stock in order to track the Nasdaq, leading to further declines in demand and ultimately further losses.
At the end of the day, while seems to be the lesser of two evils chosen by investors, there’s nothing fun about it. Ultimately, if the company is delisted, it may find it overwhelmingly difficult to access the capital it needs to survive.
The Silver Lining
There is a silver lining to consider here. In September, TTNP announced that it would be exploring strategic alternatives. This is the terminology generally used by struggling companies that are looking for opportunities to sell themselves.
Ultimately, Titan Pharmaceuticals hopes to be acquired before its financial condition leads to insolvency.
Whether or not that will happen, well, nobody knows. What we do know is that TTNP has some valuable assets. The company’s claim to fame is a drug delivery system that’s designed to simplify the treatment of chronic conditions. Therefore, any company that manufactures a drug used to treat a chronic condition could have an interest in an acquisition of Titan Pharmaceuticals.
The Bottom Line
No matter how you slice it, an investment in Titan Pharmaceuticals at this stage of the game is a risky concept. If all goes well, the company, or the vast majority of its assets will be sold and investors will realize a return, but it will take the planets lining up just right to make that happen. If the reverse split happens, more dilution is likely ahead.
Unfortunately, TTNP is in a tough financial position. Sure, they have great technologies and products, both on the market and under development, but without a strong financial foundation, that means nothing. While I hope the best for TTNP stock and its investors, I would strongly suggest considering the risks before buying into this potentially sinking ship.
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