THQ has a plan to dodge the Nasdaq delisting bullet.

In January, struggling publisher THQ was given six months to get its financial house in order or be delisted from the Nasdaq. Its stock price has enjoyed a little bit of a bounce since then (although it’s been on a slow but steady slide since peaking at around 75 cents in mid-April), but with the deadline looming, a return to the glorious “dollar days” of old isn’t looking terribly likely in the near-term. So now THQ is going to Plan B: a reverse stock split.

The ol’ reverse stock split trick, as explained by someone with only the most tenuous grasp on what it means, is actually a pretty straightforward proposition. Take three shares in THQ – or five, or ten – and smoosh ’em together. Pound them with a hammer until they’re good and flat, then roll them up into a ball and presto! Three THQ shares – or five, or ten – have become one, with a commensurate increase in value. Of course, the actual value to shareholders doesn’t change because the increase in individual share price is offset by the decrease in the number of shares held, but the Nasdaq doesn’t care about that; it just wants to see that price over the $1 mark, and it’s not too particular about how it happens.

The strategy carries some risks, as noted in THQ’s most recent SEC filing, including decreased overall market capitalization and the very ugly possibility that its share price will sink back down to where it is now, which is pretty much the worst outcome possible. It will also increase the number of “odd lots” held by people with small numbers of THQ stocks. On the other hand, it’s not as though it has a lot of options to pick from.

The plan will be put in front of stockholders during a meeting on June 29 and, assuming it gets the green light, will take effect in early July. A full breakdown of THQ’s unstoppable master plan is up at the THQ Investor Relations website.


Leave a reply

You may also like