Wednesday, October 10, 2012

GMX Resources Schedule 14A Regarding Reverse Split ($GMXR)

Some interesting tidbits in the actual Schedule 14A (proxy statement) regarding the special shareholder meeting (on Nov 29) and reverse split proposal.

Increase in the Number of Shares of Common Stock Available for Future Issuance - By reducing the number of shares outstanding without reducing the number of shares of available but unissued Common Stock, a reverse stock split will increase the number of authorized but unissued shares. The Board believes the increase is appropriate for use to fund the maturity of the Company's outstanding 2013 Notes and future operations of the Company. Although the Company does not have any pending acquisitions for which shares are expected to be used, the Company may also use authorized shares in connection with the financing of future acquisitions. [...]

Although a reverse stock split would not have any dilutive effect on our shareholders, a reverse stock split without a reduction in the number of shares authorized for issuance would reduce the proportion of shares owned by our shareholders relative to the number of shares authorized for issuance, giving our Board an effective increase in the authorized shares available for issuance, in its discretion. Our Board from time to time may deem it to be in the best interests of the Company and our shareholders to enter into transactions and other ventures that may include the issuance of shares of our Common Stock. If our Board authorizes the issuance of additional shares subsequent to the reverse stock split described above, the dilution to the ownership interest of our existing shareholders may be greater than would occur had the reverse stock split not been effected. [...]

The Board believes the increase in available shares for future issuance is appropriate to fund the future operations of the Company and to address the upcoming maturity of the Company's 5% convertible notes due in February 2013 Notes (2013 Notes) [...]

Of our 82,622,130 shares outstanding as of October 8, 2012, we are not aware of any person known to beneficially own more than 5% of our outstanding Common Stock as of the latest date such persons have filed reports of beneficial ownership with the SEC.
Very interesting. As I suspected, they seem to want to exchange stock plus some cash for the 2013 notes.

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