EnteroMedics Inc (NASDAQ:ETRM), a leading company that’s known for developing medical devices with the help of neuroblocking technology, announced the reverse stock split. As per the reports, the company received approval for three proposals, including-
- Increment in the number of shares allotted to common stock that are authorized to be issued after the reverse stock split
- Amendment to company’s Certificate of Incorporation that can pave the way for a reverse split of outstanding and issued shares of common stock.
- Issuing common stock shares underlying convertible warrants and notes issued by the company as per the terms of the recently executed security purchase agreement.
Insights of The Matter
Reports claim that company’s shareholders have approved the reverse split of one for fifteen of its common stock shares. These shares will become eligible for trading on January 7, 2016. Under the terms of this execution, each fifteen shares of outstanding and issued common stock of the company will be converted into one common stock share. Any fractional number resulting from this adjustment will be rounded up to the closest whole number.
EnteroMedics has appointed Wells Fargo Bank National Association as the transfer agent for this transaction, which will communicate to all the shareholders the procedure to exchange existing share certificates with new book-entry shares.
Under the terms of the recently signed security purchase agreement, it will also issue senior amortizing convertible warrants and notes worth $25 million to five institutional investors. It has already issued warrants and notes worth $1.5 million; rest of them will be issued in two tranches of $12.5 million and $11 million.
Whatever proceeds that the company generates through this transaction, are likely to be used to commercialize its vBloc Neurometabolic Therapy. Apart from this, the funds will also be used to carry out product development activities, clinical development activities, and other general and working capital purposes. It will keep all the investors abreast with future developmental initiatives.
