SCMR » Topics » Purpose of the Reverse Stock Split and Authorized Stock Reduction

This excerpt taken from the SCMR DEF 14A filed Nov 24, 2008.

Purpose of the Reverse Stock Split and Authorized Stock Reduction

The primary purpose of the reverse stock split is to increase proportionately the per share trading price of Sycamore’s common stock. The Board of Directors believes that doing so may improve the perception of Sycamore common stock as an investment and enable Sycamore common stock to appeal to a broader range of investors. Sycamore believes that a number of institutional investors may be unwilling to invest, and in some cases, have internal policies prohibiting them from investing, in lower priced stocks. Sycamore also believes that many brokerage firms may be reluctant to recommend lower priced stocks to their clients. Because brokers’ commissions on low-priced stocks generally represent a higher percentage of the stock price than commissions on higher priced stocks, the current share price of Sycamore’s common stock can result in stockholders paying transaction costs that are a higher percentage of their total share value than would be the case if Sycamore’s common stock were priced substantially higher. This may limit the willingness of investors to purchase Sycamore common stock. By effecting a reverse stock split, Sycamore believes it may be able to raise the trading price of its common stock to a level at which Sycamore’s common stock could be viewed more favorably by potential investors. If the reverse stock split results in an increased trading price and increased investor interest, the Board of Directors believes that stockholders may benefit from improved trading liquidity of Sycamore’s common stock.

An additional purpose of the reverse stock split is to reduce proportionately the number of shares of Sycamore common stock issued and outstanding. As of September 30, 2008, a total of 283,869,946 shares of common stock were issued and outstanding. The Board of Directors believes that a reduction in the number of shares outstanding through a reverse stock split may permit a more meaningful comparison by investors of Sycamore’s results of operations in the future, particularly relating to period-to-period comparisons of per share net earnings or net loss measures. In connection with the reduction in the number of shares of Sycamore common stock issued and outstanding pursuant to the reverse stock split, the Board of Directors believes it advisable to amend the Amended and Restated Certificate of Incorporation to reduce correspondingly Sycamore’s authorized capital stock and common stock.

If approved by stockholders, the Board will consider those market or business factors that it deems relevant in determining whether, when and at which Approved Option to implement a reverse stock split. These factors, including the stock market conditions and the trading price of Sycamore’s common stock, are dynamic and subject to fluctuation. Given the time and expense associated with convening a special meeting of stockholders, which would be required to consider a reverse stock split at a later time, the Board of Directors has determined that it is most efficient to seek stockholder approval of a reverse stock split for each Approved Option at this Annual Meeting.

 

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This excerpt taken from the SCMR DEF 14A filed Nov 20, 2007.

Purpose of the Reverse Stock Split and Authorized Stock Reduction

The primary purpose of the reverse stock split is to increase proportionately the per share trading price of Sycamore’s common stock. The Board of Directors believes that doing so may improve the perception of Sycamore common stock as an investment and enable Sycamore common stock to appeal to a broader range of investors. Sycamore believes that a number of institutional investors may be unwilling to invest, and in some cases, have internal policies prohibiting them from investing, in lower priced stocks. Sycamore also believes that many brokerage firms may be reluctant to recommend lower priced stocks to their clients. Because brokers’ commissions on low-priced stocks generally represent a higher percentage of the stock price than commissions on higher priced stocks, the current share price of Sycamore’s common stock can result in stockholders paying transaction costs that are a higher percentage of their total share value than would be the case if Sycamore’s common stock were priced substantially higher. This may limit the willingness of investors to purchase Sycamore common stock. By effecting a reverse stock split, Sycamore believes it may be able to raise the trading price of its common stock to a level at which Sycamore’s common stock could be viewed more favorably by potential investors. If the reverse stock split results in an increased trading price and increased investor interest, the Board of Directors believes that stockholders may benefit from improved trading liquidity of Sycamore’s common stock.

An additional purpose of the reverse stock split is to reduce proportionately the number of shares of Sycamore common stock issued and outstanding. At November 1, 2007, a total of 282,991,049 shares of common stock were issued and outstanding. The Board of Directors believes that a reduction in the number of shares outstanding through a reverse stock split may permit a more meaningful comparison by investors of Sycamore’s results of operations in the future, particularly relating to period-to-period comparisons of per share net loss or net earnings measures. In connection with the reduction in number of shares of Sycamore common stock issued and outstanding pursuant to the reverse stock split, the Board of Directors believes it advisable to amend the Amended and Restated Certificate of Incorporation to reduce correspondingly Sycamore’s authorized capital stock and common stock.

If approved by stockholders, the Board will consider those market or business factors that it deems relevant in determining whether, when and at which Approved Option to implement a reverse stock split. These factors, including the stock market conditions and the trading price of Sycamore’s common stock, are dynamic and subject to fluctuation. Given the time and expense associated with convening a special meeting of stockholders, which would be required to consider a reverse stock split at a later time, the Board of Directors has determined that it is most efficient to seek stockholder approval of a reverse stock split for each Approved Option at this Annual Meeting.

 

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