Savara Inc. and Mast Therapeutics Inc (NYSEMKT:MSTX) reported the expected exchange ratio computed under the January 6, 2017 merger deal. Upon closure of the merger deal, each due share of Savara common stock will be converted into the right to get 0.5860 of a share of MSTX after adjusting for reverse stock split.
The exchange ratio is dependent on each party’s existing capitalization and Mast’s projected net cash as of the probable closing date. The company’s current capitalization is dependent on a projected reverse stock split of 1 share of MSTX for every 70 shares of MSTX.
Depending on the expected exchange ratio, after the merger, current Savara stockholders are projected to own in the aggregate almost 77% of the combined firm, and current Mast stockholders are expected to own almost 23% of the combined firm. The exchange ratio can be adjusted depending on any changes to each company’s capitalization before closing.
The major factors behind the reverse stock split process is to increase the stock price to a mark that meets the guidelines for listing and is within more of a normal trading price among firms listed on Nasdaq platform, and to ensure Mast will have an adequate amount of approved and unissued common stock to close the merger deal.
Mast reported that the reverse stock split will not have any immediate impact on the aggregate market value of its stock, or any shareholder’s ownership in the firm, but may offer long-term benefits to the combined firm and its shareholders.
The changed share price will likely expand the pool of potential shareholders into the firm by meeting guidelines of certain institutional shareholders who have internal policies barring them from buying stocks below a specific minimum share price, achieving requirements of certain financial experts who have policies to disappoint their customers from investing into such equities, and making the firm eligible for addition in certain biotech indices.