ETAO International Co., Ltd. Announces 1 for 20 Reverse Share Split, Increase of Authorized Shares and Alteration to Its Share Capital

Rhea-AI Summary

ETAO International Co., announces a 1 for 20 reverse stock split, increase in authorized shares, and alteration to share capital approved by shareholders, effective March 26, 2024. The reverse split aims to increase the price per share by approximately twenty times. CEO to gain significant voting power post-split. Stock options and restricted shares to be adjusted. Shareholders to receive new share certificates.

Financial Analyst

The announcement of ETAO International Co., Ltd.'s 1 for 20 reverse stock split, increase in authorized shares and alteration to share capital is a strategic move that could have several financial implications. From a liquidity standpoint, reverse splits are often employed by companies to elevate their stock price, thereby potentially avoiding delisting from major exchanges that have minimum share price requirements. Although the company states that the post-split share price may not maintain its proportional increase, the short-term effect could still provide a temporary boost in share price perception.

Additionally, the reclassification of shares and the resulting shift in voting power to the CEO, Mr. Wensheng Liu, is noteworthy. This consolidation of voting power could lead to concerns about corporate governance and shareholder influence, particularly for minority investors. The adjustment of stock options and restricted shares to reflect the reverse split is a routine procedure to maintain the value and incentives for employees and investors holding these instruments. However, the impact on market perception and the company's governance structure could influence investor confidence and the stock's long-term performance.

Corporate Governance Expert

The re-designation of shares resulting in ETAO's CEO, Mr. Wensheng Liu, increasing his total voting power from 48.5% to 86.7% represents a significant shift in the company's power dynamics. Such a change raises questions about the balance of power within the company and the potential impact on decision-making processes. While concentrated control can lead to swift strategic decisions, it can also lead to increased risks if the interests of the majority shareholder diverge from those of the company or its minority shareholders.

Investors should be aware of the implications of such a governance structure, as it could affect the company's agility in adapting to market changes or pursuing new opportunities. The concentration of voting power may also influence the company's ability to attract new investors who might be wary of limited influence over corporate affairs. This change underscores the importance of understanding the corporate governance practices of a company and how they can affect investment risk and shareholder value.

Market Research Analyst

ETAO's reverse stock split and subsequent trading on a split-adjusted basis may result in a higher per-share price, which could alter the stock's marketability. A higher share price might make the stock more appealing to institutional investors and reduce volatility due to lower trading by retail investors. However, the market's reception to such corporate actions can be mixed, as they may be perceived as a cosmetic change rather than an improvement in the company's fundamental value.

Market participants will closely monitor the stock's performance post-split to gauge the effectiveness of the reverse split. It is essential to consider that while the reverse split aims to increase the stock price, it does not inherently change the company's market capitalization or its underlying financial health. Investors and analysts will likely scrutinize the company's future financial performance and strategic direction to determine if the reverse split aligns with positive business developments or if it serves as a temporary measure to meet exchange listing requirements.

This press release has been corrected to include further details regarding the reverse stock split of ETAO International Co., Ltd.

We hereby issue a formal amendment to supersede our previously released press release dated March 19, 2024. This amended communication is intended to replace the original statement in its entirety and provides updated, accurate information. We advise all stakeholders to refer to this latest version for the most current details regarding the matter previously addressed.

NEW YORK, March 21, 2024 /PRNewswire/ -- ETAO International Co., Ltd. (the "Company," "we" or "ETAO") (NASDAQ: ETAO), today announced that a 1 for 20 reverse split of its ordinary shares, an increase of authorized shares and the alteration to the share capital of the Company were approved by the Company's shareholders on February 16, 2024 and is expected to become effective on or around March 26, 2024. 

ETAO International Co., Ltd. Announces 1 for 20 Reverse Share Split

Upon the effectiveness of the reverse share split, ETAO shareholders will receive one new ordinary share of ETAO for every twenty shares they hold. ETAO's ordinary shares are expected to begin trading on a split-adjusted basis when the market opens on March 26, 2024.

The reverse share split is expected to lead ETAO's ordinary shares to trade at approximately twenty times the price per share at which it trades prior to the effectiveness of the reverse share split. ETAO, however, cannot assure that the price of its Class A ordinary shares after the reverse split will reflect the 1-for-20 reverse split ratio, that the price per share following the effective time of the reverse split will be maintained for any period of time, or that the price will remain above the pre-split trading price.

Following the 1-for-20 reverse split, the increase of authorized shares, and the alteration of the share capital, the Company's authorized issued share capital consists of (i) 200,000,000 ordinary shares, par value US$0.002 each, designated as 150,000,000 Class A ordinary shares, par value US$0.002 each (the "Class A Ordinary Shares") and 50,000,000 Class B ordinary shares, par value US$0.002 each (the "Class B Ordinary Shares"); and (ii) 50,000,000 preferred shares (the "Preferred Shares"), par value US$0.002 each.

Except for 49,613,200 ordinary shares beneficially owned by Mr. Wensheng Liu, the CEO and the Chairman of ETAO, each outstanding ordinary shares of ETAO will be re-designated into one Class A Ordinary Shares. Each ordinary shares beneficially owned by Mr. Wensehng Liu will be re-designated into one Class B Ordinary Shares. Each Class A ordinary share is entitled to one (1) vote, and each Class B Ordinary Share is entitled to thirty (30) votes. Prior to the re-designation, Mr. Liu had 48.5% of the total voting power. Immediately following the re-designation, Mr. Liu will have 86.7% of the total voting power. 

The Class A Ordinary Shares of ETAO will continue to trade on the Nasdaq Capital Market under the symbol "ETAO". 

Company has adopted the Amended and Restated Articles and Memorandum of Association in connection with the reverse share split, increase of authorized shares and the alteration to the share capital.

Treatment of Stock Options and Restricted Shares 

The number of ordinary shares into which ETAO 's outstanding stock options and restricted shares as well as the options' relevant exercise price per share will be proportionally adjusted to reflect the reverse split.

Fractional Shares 

Any fractional shares that would have resulted because of the reverse split will be rounded up to the nearest whole share. 

New Ordinary Share Certificates 

ETAO will adopt a new share certificate in connection with the implementation of the reverse share split. ETAO's transfer agent, Continental Stock Transfer & Trust Company, will manage the exchange of share certificates. Shareholders of record will receive a letter of transmittal providing instructions for the exchange of their old certificates as soon as practicable following the effectiveness of the reverse split. Shareholders should not send in their old stock certificates until they receive a letter of transmittal from Continental Stock Transfer & Trust Company. Shareholders who hold their shares through a securities broker or nominee (i.e., in "street name") will be contacted by their brokers or nominees with any instructions. 

For more information, shareholders and securities brokers should contact Continental Stock Transfer & Trust Company at 212-845-5294. 

About ETAO

ETAO International Co., Ltd., a Cayman Islands company, aims to be the world's leading digital healthcare group providing telemedicine, hospital care, primary care, pharmacy, and health insurance covering all life stages of patients. "ETAO" brand means "Best Medical Way" with transformative medical care and unparalleled service. ETAO is a holding company incorporated in the Cayman Islands with no material operations. ETAO conducts the operations primarily through the affiliated entities in China. 

Forward-Looking Statements 

This press release contains certain statements that may include "forward-looking statements." All statements other than statements of historical fact included herein are "forward-looking statements." These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involving known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including the uncertainty about the spread of the COVID-19 virus and the impact it will have on the Company's operations, the demand for the Company's products, supply chains and economic activity in general. These and other risks and uncertainties are detailed in the risk factors discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on the SEC's website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these risk factors. Other than as required under the applicable securities laws, the Company does not assume a duty to update these forward-looking statements.

Related Links
https://www.etao.world 

Media Contact:
Wilson Liu
Tel:347-306-5134
wilson.liu@etao.world

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SOURCE ETAO International Co., Ltd.

FAQ

What is the reverse stock split ratio announced by ETAO International Co., ?

ETAO International Co., announced a 1 for 20 reverse stock split ratio.

When is the reverse stock split expected to become effective for ETAO?

The reverse stock split for ETAO is expected to become effective on or around March 26, 2024.

What is the impact of the reverse stock split on ETAO's share price?

The reverse stock split is expected to lead ETAO's ordinary shares to trade at approximately twenty times the price per share at which it trades prior to the split.

Who will gain significant voting power post the reverse stock split?

Mr. Wensheng Liu, the CEO and Chairman of ETAO, will gain significant voting power post the reverse stock split.

How will stock options and restricted shares be adjusted after the reverse stock split?

Stock options and restricted shares of ETAO will be proportionally adjusted to reflect the reverse split.

How will shareholders receive new share certificates following the reverse stock split?

Shareholders will receive a new share certificate in connection with the implementation of the reverse split managed by ETAO's transfer agent, Continental Stock Transfer & Trust Company.