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The9 Plans Reverse Split of ADSs to Bolster Stock Price; Shares Jump

Peter H. Frank 2018-11-19 14:52 PM
The9 Plans Reverse Split of ADSs to Bolster Stock Price; Shares Jump

Shares of The9 Ltd. rose nearly 19 percent today as news surfaced that the beleaguered internet company intends to increase the number of ordinary shares represented by each of its American depositary share as it struggles to meet listing requirements for the Nasdaq Stock Market. 

In a filing with the Securities and Exchange Commission, The Bank of New York Mellon, which acts as depositary for the company's shares, said the ratio of ordinary shares of The9 represented by its ADSs would change from one-to-one to three-to-one. Increasing the number of underlying, ordinary shares for each ADS is a common method for attempting to bolster the trading price of an ADS. 

The9 has made no public announcement of the intended change and reiterated its one-for-one ratio in the company's annual report submitted April 27. But in an amendment filed with the SEC on April 30, Bank of New York notified regulators that the change in ratios would become effective May 9. 

News of the change comes as The9 (Nasdaq: NCTY) seeks various options to regain compliance with the Nasdaq Global Market, which has threatened to delist the company if it does not raise its stock price. The9 closed today at 41 cents per share, up more than 6 cents per share, or 18.5 percent. 

In an announcement on March 22, the Shanghai-based company said it had been notified by Nasdaq officials that it had fallen below the $15 million minimum requirement regarding the market value of its publicly held shares. 

Then, on April 9, the company said it had received a second notification from Nasdaq officials regarding its market value, explaining that the overall market value of its stock had fallen below the required $50 million level. It also noted that its assets had fallen below required levels and that its annual revenue also did not meet the $50 million threshold. 

The company said at the time it was looking for methods to regain compliance including a potential transfer of its listing to the less-stringent Nasdaq Capital Market. 

The company reported last week that it had revenue for the six months ended Dec. 31 of $8.8 million. For the same six months, it said losses attributable to The9 amounted to $674,238, or 12 cents per share.