It's been nearly a year since Advanced Cell Technology (OTCBB: ACTC) made the historic announcement of the FDA's decision to allow ACT to commence a study measuring the effectiveness of its embryonic stem cell-based retinal pigment epithelium (RPE) technology, only the second company - behind Geron (GERN) - to have been granted the authority from the FDA to begin a trial based on embryonic stem cell technology.
The price spike didn't last for too long, however, as the swing/momentum/day traders went looking for some fresh pickings and other investors decided that the wait to market might take years. Some also fretted over financing concerns, as any small company is going to need to raise cash during its developmental phases.
The most recent bout of downward pressure came from a lawsuit filed by entities seeking compensation relating to previous share and warrant agreements. When news of the lawsuit hit, ACTC dropped below ten cents, before a temporary rebound saw them touch twelve cents.
Shares have since settled at the ten cent mark again.
This week the company announced that it had come to an agreement with the 40 warrant holders to settle lawsuit. The settlement includes the issuance of "240.5 million shares in total to this group of holders, in exchange for a mutual two-way release of any current and/or future claims."
In order to actuate the settlement, ACT is issuing a preliminary proxy and holding a special meeting in January to authorize raising the limit of authorized shares. The 240 million-plus shares will be issued to the warrant holders following an affirmative vote on the share count.
The resolution of the lawsuit takes care of any investor uncertainty surrounding the issue, but obviously at a dilutive cost. The already high share count for this company, which is about to go higher, also has many investors predicting a reverse split.
History has demonstrated time and again that reverse splits are not kind on share prices after they are put into effect, which could be a reason - along with the others discussed above - that ACTC is still sitting at a dime, even given the company's potential impact on the future of stem cell treatments.
In comparison, Geron once traded for a near-billion-dollar market cap at the height of the stem cell hype. Now, Geron has put its stem cell development on hold in order to conserve resources for its cancer pipeline development.
That makes Advanced Cell Tech the arguable leader in this technology.
Although a reverse split may have a temporary negative effect on the share price, in the long run it might be a good idea.
A company receives a significant amount of credibility when it comes out of "penny" status and off the bulletin boards. Many long term minded investors don't even go looking for investment possibilities on the OTCBB, and the large funds certainly don't, so a move to conduct an RS with a simultaneous move to a big board might not be such a bad idea for ACT.
Any such event would likely come following the conclusions of all things relating to the lawsuit settlement, and could draw in some new investor interest.
With the resolution of the lawsuit now in sight, the company can concentrate fully on bringing its potentially ground-breaking technology to market.
Disclosure: Long ACTC.