Reverse Split – Part II – A Slow Motion Uplisting

By: Robert Grosshandler | July 12, 2020

We’re getting lots of great, well thought out comments on the post about our considering doing a reverse split. Keep them coming, please. This blog post tries to address the concerns many of you raised (making it a bit choppy). Some of you are seeking ways to help, which is also great. Nothing is decided yet.

Here’s what I clearly failed to explain: A reverse split is almost certainly on the roadmap as part of uplisting.

Uplisting (getting listed on an exchange like the NASDAQ or NYSE) won’t happen with low priced shares. Our share price probably has to be more than $5 to make it work.

I’m calling this a slow motion uplist. Can we get some of the benefits of uplisting sooner by doing a reverse split unusually early in the process? Can we manage the dangers of a reverse split?

Framing the considerations

The future of iConsumer is dependent on attracting more shoppers, more shopping, and new capital to fund that growth.

Growing the business is dependent on customers’ perception of how easy it is to enjoy the rewards of receiving publicly tradeable stock as the incentive for shopping.

Being a “penny stock” is now making it harder for customers to enjoy those rewards.

Uplisting (moving to an exchange like the NASDAQ or NYSE and losing the penny stock label) makes iConsumer shares a better, easier-to-use reward.

Uplisting will require a reverse split, significant additional capital, and is very expensive on an ongoing basis. (We’re not there yet).

Does doing a reverse split (just losing the penny stock label) much earlier than uplisting get us sufficient business benefits more quickly? In other words, can we do a slow motion uplisting?

Low priced shares are an accident of history. That choice worked initially, but being a “penny stock” is now hurting our growth.

Does a reverse split without a concurrent uplisting help solve the transfer challenge? Are the potential consequences acceptable without the additional benefits and greater certainty of uplisting?

Some history

We created iConsumer to do something never done before – take ordinary people on the startup company / public company journey. Make every customer an owner, and every owner a customer, by rewarding customers with stock (ownership) for doing cool things (like making the company money).

The comments on our blog posts are one example of how this is so powerful. Stakeholders are actively involved in guiding this business. It make us stronger and more likely to succeed.

This is a fundamental business issue

To those folks who advised me to stick to our knitting and focus on the business: I agree completely. Our basic business model – using publicly-traded stock as an incentive, is less attractive than it was initially because it’s gotten harder to trade the stock you’re awarded.

Being a “penny stock” is now getting in the way of growing the business.

Stock price didn’t matter initially. It was easy to transfer iConsumer stock into a brokerage account, even though we were a penny stock. That changed. Now shoppers & prospective shoppers are complaining. That’s the basic business challenge driving this conversation.

It’s more than shoppers who are affected

Our ability to raise capital to support faster growth is reduced. Potential investors (especially the smaller investors) want to invest, put the stock they just bought into their brokerage accounts, and then wait for a really big payday and be able to sell easily. Not easy? Not interested.

Looking at alternatives

Accelerating the reverse listing portion of the uplisting process is not the only path we’re exploring to address this challenge. If we can solve the transfer issue without a reverse split, a big hooray. Most of the time, being a penny stock also means that somebody played games with the corporate structure along the way. Reverse mergers, shell companies, and other questionable practices. We’re squeaky clean, so maybe we can get a compliance department at a big broker to look beyond mere stock price. It just takes one big broker to easily accept deposits to make shoppers and investors happy. But so far, no progress there.

Chicken and egg

I’m told (by paid and unpaid advisers with more experience in this field than all of us combined AND who have a stake in a positive outcome in their advice) that uplisting (including raising our stock price) might make a difference. Stop being a penny stock, get on an exchange, and life gets better. To stop being a penny stock, we need to get bigger and better.

Some things to worry about

Our commenters talked about all the companies that did a reverse split because the company was in trouble. The reverse split didn’t help, and might have hurt. Those examples certainly are making me think harder about this. A reverse split may not solve the transfer issue, and has risks.

I’m thinking the better comparisons to use to analyze risk are companies like Relmada, AudioEye, Duos Technologies, or eSports, who did reverse splits in conjunction with an uplist.

Being a penny stock was mostly an accident

As we thought through using stock as a reward / incentive, we asked ourselves (and anybody who would listen) “how should we price our stock? How many shares should we give somebody for signing up? How many shares for telling a friend who becomes a shopper?”. It was perhaps the most fun thing we had to decide. We decided we wanted to give lots and lots of shares as a reward. Getting 100 shares sounds so much better than getting 1 share for doing something. Even if the total worth of those 100 shares is exactly the same as the worth of 1 share. So, we started out with a share being priced at $.045.

Had the wind been blowing in a different direction that day, we could have priced our stock at $4.50 a share. And today, we’d be selling stock for $18 a share, and it’d be trading at $12 a share.

Thanks again

This is complicated. Lots to think about. Comments welcomed.