Biostage combines stock 20:1 to satisfy $4M private investor
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Biostage CEO Jim McGorry (left) and Chief Medical Officer Saverio La Francesca.
In order to complete a $4-million deal with a private investor and save the company from insolvency, Holliston biotech Biostage has performed a 20:1 reverse stock split.
The reverse stock split reduced the number of Biostage shares from 39.8 million to 2 million. As a result of having fewer shares on the market, the company's stock price went up from 6.6 cents per share to 91 cents when the markets closed on Tuesday.
The move was made to satisfy a condition pursuant to an agreement with private investor Bin Zhao. The $4-million is structured in such a way the investor will own more than 50 percent of the company's stock.
In a statement, CEO Jim McGorry said the reverse stock split moves the company closer to funding and re-establishing normal operations.
In exchange for the $4 million, Biostage gave two of its board seats to Bin Zhao. If the investor ends up owning more than 50 percent of the Biostage stock -- as the deal is structured to do -- then Biostage will give Bin Zhao a majority of the seats on the board.
As part of the agreement, McGorry and Thomas McNaughton, Biostage's chief financial officer, agreed to waive their rights to any severance pay as a result of the company changing ownership, according to the SEC filings.
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