PARIS - Sequans Communications S.A. (NYSE: SQNS), a prominent semiconductor company for 4G and 5G connectivity, announced a change in its American Depositary Shares (ADS) structure. The Board of Directors has approved a modification from four ordinary shares per ADS to ten, effectively enacting a 1-for-2.5 reverse stock split for the ADSs. This adjustment is expected to increase the trading price of the ADSs, aligning the company with the New York Stock Exchange's minimum price requirement.
The new ratio is set to be effective before the market opens on Wednesday, October 9, 2024. Sequans' ordinary shares will not be impacted by this change. The company's CEO, Georges Karam, expressed confidence that the revised ADS ratio, alongside the anticipated asset sale to Qualcomm (NASDAQ:QCOM), will position Sequans for growth and broaden its investor appeal. The sale is on track, having received clearance from the French government, with the aim to fulfill the remaining conditions for closure.
Sequans' total outstanding share capital remains at 249,928,692 ordinary shares. The expected increase in the ADS trading price is intended to help the company meet the NYSE's compliance obligations by the October 9 deadline. No fractional ADSs will be issued; instead, shareholders will receive a cash payment for fractional shares based on market trades.
Holders of ADSs in book-entry form or through financial institutions do not need to take any action, as the change will be automatically reflected in their accounts post-October 9. However, certificate holders will need to exchange their certificates for new book-entry ADSs at the adjusted rate. They will receive instructions and a Letter of Transmittal from the depositary after the effective date.
This press release contains forward-looking statements, including projections about the future ADS price and compliance with NYSE listing requirements. Sequans cautions that these statements are predictions subject to risks and uncertainties, and there can be no assurance that the anticipated results will materialize. The company's performance could differ materially due to various factors, including market conditions and industry competition.
Based on a press release statement, this news article presents the key facts surrounding Sequans Communications' strategic decision to modify its ADS ratio to comply with NYSE regulations and enhance investor appeal.
In other recent news, Sequans Communications has been the focus of considerable attention following its significant deal with Qualcomm, which involves selling its 4G technology for $200 million. This transformative agreement not only bolsters Sequans' financial position but also validates its technology portfolio, according to Roth/MKM. The firm maintains a Buy rating for Sequans and has set a price target of $3.00.
In addition to this, Sequans reported its first quarter financial results for 2024, with revenues reaching $6.0 million, despite a year over year decrease. The company has also managed to reduce its operating loss to $8.5 million from the previous quarter's $12.8 million.
Furthermore, Sequans has secured standstill agreements with Lynrock Lake, Nokomis, and Renesas until later in the year, giving it additional time to secure a strategic transaction. It also announced a $15 million licensing agreement for the Monarch2 LTE platform with an undisclosed technology company, a move expected to boost revenues in the future.
Finally, Sequans has decided to suspend the development of its 5G Taurus product to focus on low-power 5G for massive IoT applications. Despite these developments, Sequans continues to actively seek a long-term strategic transaction to bolster its balance sheet.
InvestingPro Insights
Sequans Communications' decision to adjust its ADS structure comes at a critical time for the company. According to InvestingPro data, Sequans has experienced a significant 120% price return over the last three months, and an even more impressive 175% return over the past six months. This recent surge in stock performance aligns with the company's efforts to meet NYSE listing requirements and potentially attract a broader investor base.
Despite these positive short-term trends, InvestingPro Tips highlight some challenges. The company is not profitable over the last twelve months, with a negative operating income of $32.7 million. Additionally, analysts do not anticipate the company will be profitable this year. These factors underscore the importance of Sequans' strategic moves, including the ADS ratio change and the pending asset sale to Qualcomm.
The company's revenue for the last twelve months stands at $28.26 million, with a concerning revenue decline of 47.17% over the same period. However, there's a glimmer of hope in the quarterly revenue growth of 5.65%, which could indicate a potential turnaround.
InvestingPro Tips also reveal that Sequans' stock generally trades with high price volatility, which is evident in its recent performance swings. This volatility, combined with the upcoming changes, may present both opportunities and risks for investors.
For those seeking a deeper understanding of Sequans' financial health and market position, InvestingPro offers 10 additional tips, providing a comprehensive view of the company's prospects in light of these recent developments.
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