SUDA Pharmaceuticals Proposed Share Consolidation for Effective Capital Structure

Based in the United States and Australia, SUDA Pharmaceuticals Ltd (ASX: SUD) is a leading drug delivery company of the world engaged in the reformulation of existing medications and delivery of drugs via the oral mucosa. To reformulate the existing pharmaceuticals, the company develops low-risk oral sprays using its proprietary OroMist® technology. The company’s OroMist® technology focuses on the underlying issues of drug efficacy like the onset of action and bioavailability.

SUDA holds a robust product pipeline, which includes an FDA-approved insomnia drug and several other drugs in its research pipeline. The company’s key projects are:

  • ZolpiMistTM: Insomnia
  • Midazolam: Pre-Procedural Anxiety and Epileptic Seizures
  • Sumatriptan: Migraine Headache
  • ArTiMist®: Malaria
  • Anagrelide: Cancer
  • Ondansetron: Chemotherapy Induced Nausea and Vomiting (CINV) and Postoperative Nausea and Vomiting (PONV)
  • Sildenafil: Erectile Dysfunction and Pulmonary Arterial Hypertension
  • Cannabinoids

Share Consolidation Update

In a recent update, SUDA informed about the proposal to consolidate its share capital via the consolidation of every 25 shares of the company into 1 share.

The share consolidation proposal has been put forward under Resolution 7 that will be considered at the Annual General Meeting of SUDA’s shareholders to be held on 12th November 2019 at the Perth Convention and Exhibition Centre.

In case the shareholders approve Resolution 7 at the Annual General Meeting, the following indicative timetable for consolidation will be followed:

Rationale behind Share Consolidation

SUDA mentioned that a very large number of securities, i.e. about 3.6 billion shares were on the issue as on 14th October 2019 (date of the Notice of Annual General Meeting), which subjects a relatively smaller size company to several disadvantages, including:

  • Additional share price volatility occurring from the fact that the minimum permissible share price movement allowed by the ASX (0.1 per cent) denotes a high proportion of the company’s stock price.
  • A considerable number of shares on issue is not proportionate to that of comparable companies.
  • Negative perceptions connected to a low share price.

SUDA’s directors believe that a share consolidation would help in alleviating these disadvantages.

Possible Effects of Share Consolidation

SUDA notified that although the consolidation does not have any direct effect on the underlying value of the firm, the value of the company’s shares on the ASX post consolidation is dependent on many factors that are beyond the company’s control.

As per the company, about 1.3 billion listed and unlisted Options, that were on the issue as on 14th October 2019, will be reorganised as per the terms and conditions of the Options and Listing Rule 7.22.1, if the consolidation gets approved. This will be done on the basis that the number of Options will be consolidated in line with the consolidation ratio, and the exercise price will be revised in inverse proportion of the consolidation ratio.

Also, SUDA’s issued shares will reduce from ~3.6 billion shares to ~142 million if shareholders approve the consolidation at the Annual General Meeting. The company informed that as the consolidation applies equally to all its security holders, individual holdings will be slashed in the same ratio. However, the value of individual holdings at the time of the consolidation will not alter.

The company’s directors believe that the share consolidation will result in a better and effective capital structure, with a share price that is more fascinating to a broad array of investors, especially overseas investors.

SUD settled the day’s trade at $0.004, up 33.33% as on 17 October 2019.


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