After receiving many questions from my subscribers, I have decided I will clarify my previous article: Neovasc (NVCN) Earnings Analysis where I explained the potential risk for investors after recently released data.
Previously I had mentioned:
"Based on yesterday’s earnings report and conference call, it seems that a reverse-split is now the only option for NVCN to remain listed on Nasdaq. NVCN has been diluting shares by having warrants exercised for quite some time now. This has caused a drastic drop in share price and equity for many long term shareholders. The board of NVCN seems to be interested in rectifying this issue, as expressed in their conference call. They believe a method, such as a reverse split, is necessary in order to restore value to shareholders. Is that truthful? Will shareholders have their equity restored?"
I then went on to explain:
"When most companies do massive financing in this manner, shareholder equity is rarely ever restored. Reverse splits can be extremely harmful to shareholders equity if dilution has not ended. Why is this? Using a reverse split to raise share-price and condense outstanding shares only makes more room for more shares to be diluted. It also gives short-sellers more of an opportunity to attack the share price. This causes shareholders to suffer an increased loss, more than if the company chose not to issue a reverse split.
Massive dilution and financing efforts should be avoided at all costs by shareholders until it is near the end or over altogether."
