Geeknet (GKNT) Files DEF 14/A Special Shareholders Meeting October 14 to Approve 1:10 Reverse Stock Split
"...Reasons for the Reverse Stock Split
The Board of Directors believes that a reverse stock split of the outstanding Common Stock and corresponding reduction in the total number of authorized shares of Common Stock may be desirable for a number of reasons.
Potential Increased Investor Interest . The Board of Directors believes that the increased market price of the Common Stock expected as a result of implementing a reverse stock split and corresponding reduction in the total number of authorized shares of Common Stock will improve the marketability and liquidity of the Common Stock and will encourage interest and trading in the Common Stock. Many brokerage houses and institutional investors have internal policies and practices that either prohibit them from investing in low-priced stocks or tend to discourage individual brokers from recommending lower-priced stocks to their customers. In addition, some of those policies and practices may function to make the processing of trades in low-priced stocks economically unattractive to brokers. Moreover, because brokers’ commissions on low-priced stocks generally represent a higher percentage of the stock price than commissions on higher-priced stocks, the current average price per share of Common Stock can result in individual stockholders paying transaction costs representing a higher percentage of their total share value than would be the case if the share price were substantially higher. Although it should be noted that the liquidity of the Common Stock may be harmed by the proposed reverse split given the reduced number of shares that would be outstanding after the reverse stock split, the Board of Directors is hopeful that the anticipated higher market price will reduce, to some extent, the negative effects on the liquidity and marketability of the Common Stock inherent in some of the policies and practices of institutional investors and brokerage houses described above.
Preferred Stock . The Board of Directors believes that, with a reduction in the total number of authorized shares of Common Stock as contemplated herein, the total number of authorized shares of Preferred Stock can also be adjusted from 10,000,000 to 1,000,000 so as to eliminate unneeded authorized shares of Preferred Stock.
Decreased Stock Price Volatility . The Board of Directors believes that the increase in the stock price that it expects to result from the reverse stock split may decrease price volatility, as small changes in the price of the Company’s Common Stock currently result in relatively large percentage changes in the stock price.
Decrease the Company’s Costs . The Board of Directors believes that the reduction in authorized shares of Common Stock and Preferred Stock would also reduce certain of the Company’s costs, such as annual franchise taxes paid to the State of Delaware.
The Board of Directors does not intend for this transaction to be the first step in a series of plans or proposals of a “going private transaction” within the meaning of Rule 13e-3 of the Exchange Act..." [Emphasis added]
Form Type: PRE 14A
Filing Date: 9/13/2010
Description: Proxy Statement - Notice of Shareholders Meeting (preliminary)