DEF 14C: Sacks Parente Golf Approves Reverse Stock Split to Regain Nasdaq Compliance

Sacks Parente Golf, Inc. announces stockholder approval for a reverse stock split, with a ratio between 1-for-10 and 1-for-20, to meet Nasdaq's minimum bid price requirement.

Summary

• Sacks Parente Golf, Inc. has received stockholder approval to amend its certificate of incorporation to effect a reverse stock split.
• The reverse split ratio will be between 1-for-10 and 1-for-20, determined by the Board of Directors.
• The primary goal of the reverse split is to increase the company's stock price to meet Nasdaq's minimum bid price requirement of $1.00 per share.
• As of May 30, 2024, the company had 14,595,870 shares of common stock issued and outstanding.
• Depending on the ratio chosen, the number of outstanding shares after the split could range from approximately 1,459,587 (1-for-10) to 729,794 (1-for-20).
• The reverse split will not affect any stockholder's percentage ownership interest, except for fractional shares which will be rounded up to the nearest whole share.
• The company received a notification from Nasdaq on December 5, 2023, regarding non-compliance with the minimum bid price requirement.
• The company requested a hearing before a Nasdaq Hearings Panel after not regaining compliance by the initial deadline.
• The amendment will not become effective until at least 20 days after the information statement is distributed to stockholders, expected to be mailed on or about July 3, 2024.
• Approval of the proposal was obtained as of May 20, 2024, by written consent of the holder of shares representing 50.6% of the voting power.

Sentiment

Score: 4

Explanation: The sentiment is neutral to slightly negative. While the company is taking action to address a compliance issue, there are risks and uncertainties associated with the reverse stock split, and no guarantee of success.

Positives

• The reverse stock split aims to increase the stock price to meet Nasdaq's minimum bid price requirement, potentially maintaining the company's listing.
• Stockholders' percentage ownership interest will not be affected, except for fractional shares which will be rounded up.
• The Board of Directors has the flexibility to determine the exact split ratio within the 1-for-10 to 1-for-20 range to maximize benefits for stockholders.
• The company is taking steps to address the Nasdaq compliance issue by requesting a hearing before the Panel.

Negatives

• There is no guarantee that the reverse stock split will increase the stock price or maintain Nasdaq listing.
• A reduction in the number of outstanding shares may impair the liquidity of the common stock.
• The post-split market price may be less than the pre-split price multiplied by the reverse split ratio.
• The reverse split may increase the number of stockholders who own odd lots, potentially increasing the cost of selling their shares.

Risks

• The market value per share may not increase after the reverse split, and the total market capitalization could be lower.
• The reverse split may not attract institutional investors or satisfy their investing guidelines.
• A decline in the market price after the reverse split may result in a greater percentage decline than without the split.
• The availability of authorized but unissued shares could be construed as having an anti-takeover effect.
• There is no assurance that the reverse split will have a long-term positive effect on the market price of the common stock.

Future Outlook

The company aims to regain compliance with Nasdaq's minimum bid price requirement through the reverse stock split. The Board of Directors will determine the exact ratio and timing of the split based on market conditions and the best interests of the company and its stockholders. There is no guarantee that the reverse split will be successful in achieving these goals.

Management Comments

• The Board of Directors has the authority, but not the obligation, in its sole discretion and without any further action on the part of the stockholders, to effect the Reverse Split within this range at any time it believes to be most advantageous to our Company and stockholders in the next 12 months.
• We believe that enabling our Board of Directors to set the ratio within the stated range will provide us with the flexibility to implement the Reverse Split in a manner designed to maximize the anticipated benefits for our stockholders.

Industry Context

Reverse stock splits are a common strategy for companies facing delisting from exchanges due to low stock prices. Many small-cap companies in various sectors, especially those undergoing financial difficulties or rapid growth phases, may consider this option to maintain listing requirements and potentially attract institutional investors.

Comparison to Industry Standards

• Many companies facing similar situations, such as delisting warnings from Nasdaq or NYSE, have implemented reverse stock splits.
• For example, companies in the biotechnology and technology sectors often use reverse splits to maintain compliance and attract institutional investors.
• The success of a reverse split varies, with some companies experiencing a sustained increase in stock price while others see only a temporary effect or further decline.
• Comparable companies that have recently undertaken reverse stock splits include those listed on the Nasdaq Capital Market facing similar minimum bid price compliance issues.

Stakeholder Impact

• Shareholders will experience a reduction in the number of shares they hold, but their percentage ownership will remain the same (except for fractional shares).
• The reverse split could impact the liquidity and market value of the company's stock.
• Employees may be affected by the company's ability to maintain its Nasdaq listing.
• The company's suppliers and creditors may be indirectly affected by the company's financial stability and access to capital.

Next Steps

• The Board of Directors will determine the exact reverse split ratio within the 1-for-10 to 1-for-20 range.
• The company will file the Reverse Split Amendment with the Office of the Secretary of State of the State of Delaware.
• Stockholders will be notified after the effective date of the reverse split.
• The transfer agent will act as exchange agent for the reverse split.

Key Dates

Keywords

reverse stock split, Nasdaq, minimum bid price, compliance, common stock, Sacks Parente Golf, stock split