Reverse Split FAQs
What are the anticipated benefits of the proposed reverse split?
Capital Gold believes the proposed reverse stock split and corresponding reduction in the total number of authorized shares of common stock is desirable for four main reasons: 1) to qualify for a national stock exchange listing, 2) to increase marketability of our shares, 3) to create earnings per share visibility and 4) to reduce stockholder transaction costs.Listing on a national stock exchange. Although we have made great strides in our operations in the past few years, we believe that our stock price does not fully reflect our achievements. Our goal is to increase stockholder value and create a more orderly market for the trading of our stock. To accomplish this, we will need to attract more institutional investors who generally will not purchase shares listed on the OTC Bulletin Board. We plan to seek a listing for our common stock on a national stock exchange and, to achieve that, we need to maintain a minimum share price of $2.00. Institutional investors would be more likely to consider our common stock as a possible investment if it was traded on a national stock exchange.
Increased, more attractive share price. The anticipated stock price resulting from the reverse stock split would bring our stock price to a level more consistent with other widely held producing gold mining companies. The higher stock price would attract more institutional and other investors who generally will not invest in a stock below a certain price threshold. Institutional investors often require a minimum of $1 per share to consider investing.
Increased earnings per share visibility. A decrease in our outstanding shares would result in increased visibility for our earnings per share. For example, if our weighted average number of shares outstanding was 200,000,000, each $2 million of net income would result in $0.01 of earnings per share and net income of less than 1.0 million would result in no earnings per share as a result of rounding. If we implemented the reverse stock split (for example, 1-for-5 split) and reduced the weighted average number of shares outstanding to 40,000,000 each $400,000 of net income would result in $0.01 earnings per share, making it easier to reflect changes in our quarterly and annual results of operations, whether up or down, in our earnings per share calculations.
Reduced stockholder transaction costs. Many investors pay commissions based on the number of shares traded when they buy or sell our stock. If our stock price was higher, these investors would pay lower commissions to trade a fixed dollar amount of our stock than they would if our stock price were lower.
What was the outcome of the Special Meeting of Shareholders held on October 31, 2008?
At the Special Meeting of Stockholders held on October 31, 2008, our stockholders, by an overwhelming majority, authorized our Board of Directors to effect the reverse split of our common stock at a ratio in the range of 1-for-4 to 1-for-6.Now that the proposed reverse stock split has been approved by our stockholders, when will the reverse stock split take effect?
Although our stockholders have approved the reverse split, our Board of Directors has decided not to effect the split unless and until market conditions stabilize. The Board wants to see the trading in our shares and the shares of other junior mining companies, as well as the markets in general, recover to more comfortable levels before the Board decides to proceed with the split.What is the range of the proposed split?
Our board of directors has the authority to determine the actual ratio of the reverse split. Provided it is within the ranges of 1-for-4 to 1-for-6 split. The Board’s selection of the specific ratio will be based primarily on the price level of our common stock at that time and the expected stability of that price level.-
If effected, how will the proposed reverse split be implemented?
The reverse stock split will differ depending on whether the shares are held beneficially in street name or whether they are registered directly in a stockholder’s name.If you are a beneficial holder of shares held in street name (e.g., by your broker), the number of shares you hold will automatically be adjusted to reflect the reverse stock split on the effective date. If you have questions with respect to how your broker will process the reverse stock split, you should contact your broker.
If your shares are registered directly in your name with our transfer agent, American Stock Transfer, you will receive a transmittal letter asking you to surrender your certificates representing pre-split shares in exchange for certificates representing post split shares. No new certificates will be issued to you until you have surrendered your outstanding certificate(s) together with the properly completed and executed letter of transmittal to American Stock Transfer. Regardless of if or when you surrender your outstanding certificate(s), your outstanding certificate(s) automatically will represent the number of post reverse split shares on the effective date.
What is the effect on existing shares of common stock?
The proposed reverse stock split would affect all of our stockholders uniformly and would not affect any stockholder's percentage ownership in Capital Gold. Voting rights and other rights and preferences of the holders of common stock will not be affected by the reverse stock split.What happens to fractional shares?
No fractional certificates will be issued as a result of the reverse stock split. Instead, all fractional shares will be paid out in cash at a rate fixed by the company upon declaration of the distribution.How will the reverse stock split affect the stock price? Will the value of my Capital Gold stock stay absolutely the same after the reverse stock split?
We cannot predict what the stock price will be after the reverse stock split is effected. As always, our stock price is subject to overall market conditions and our future financial results. We cannot assure that the price will rise in proportion to the ratio of the reverse split.
