Psychemedics to delist from Nasdaq after reverse stock split

DALLAS - Psychemedics Corporation (NASDAQ:PMD), a global provider of hair testing for drugs of abuse, has announced plans to deregister its common stock and delist from the Nasdaq Capital Market. The Board of Directors, advised by an independent Transaction Committee, approved the move in an effort to reduce the costs associated with being a public reporting company, with anticipated annual savings of over $900,000.

The company's decision, pending stockholder approval at the upcoming 2024 Annual Meeting of Stockholders in the fall, involves a reverse stock split at a ratio between 1-for-4,000 and 1-for-6,000, followed by a forward split to maintain the share count for continuing stockholders. Investors holding fewer shares than the reverse split ratio will be cashed out at $2.35 per share, a premium over the stock's closing price on August 9, 2024, and without brokerage commissions. This price is backed by a fairness opinion from Mirus Capital Advisors Inc.

Psychemedics aims to maintain fewer than 300 record holders of its common stock, which would exempt the company from the SEC's public reporting obligations. The reverse stock split is intended to provide liquidity to smaller shareholders and allow the company to focus on long-term growth without the burdens of public company costs.

To fund the purchase of fractional shares resulting from the reverse stock split, Psychemedics entered into a stock purchase agreement on Monday. Investors have committed to buying up to 1,595,744 shares at $2.35 per share, totaling up to $3,750,000. The proceeds are intended for the purchase of fractional shares and for general corporate purposes.

The Board unanimously agreed that the proposed transaction is in the best interests of the company and its stockholders, citing the high costs and management time involved in maintaining public company status, limited trading volume, and the opportunity to focus on core operations without the distraction of public company expenses.

Following stockholder approval and the completion of the necessary filings and regulatory processes, Psychemedics expects to terminate the registration of its common stock with the SEC and delist from the Nasdaq Capital Market shortly after the Annual Meeting. The company will cease to file reports with the SEC and its stock will no longer be listed on Nasdaq. The Board reserves the right to abandon the reverse stock split and terminate the purchase agreement if deemed necessary before the completion of the transaction.

This article is based on a press release statement from Psychemedics Corporation.

In other recent news, Psychemedics Corporation has recently made a significant change in its corporate governance, replacing its auditor. The company's Audit Committee dismissed BDO USA, P.C., and appointed Whitley Penn LLP in its stead. This decision was made without any adverse opinions or disagreements on financial statements for the fiscal years ending December 31, 2022, and December 31, 2023.

Psychemedics had not consulted Whitley Penn LLP on any matters requiring discussion before the appointment. The company has fulfilled regulatory requirements, providing BDO with a statement regarding the change and securing an agreement from BDO to the Securities and Exchange Commission.

This development is a noteworthy event for Psychemedics, a Delaware-based corporation with its principal executive offices in Dallas, TX. The change was reported in a Form 8-K filed with the SEC, in accordance with the Securities Exchange Act of 1934.

InvestingPro Insights

As Psychemedics Corporation (NASDAQ:PMD) prepares to transition away from the public eye, a closer look at its financial health through InvestingPro data reveals a nuanced picture. With a market capitalization of $10.62 million, the company's size is relatively modest. Notably, the P/E ratio stands at -2.39, indicating that investors have been willing to bet on future growth despite the company not currently being profitable. This is further reflected in the adjusted P/E ratio for the last twelve months as of Q1 2024, which is slightly improved at -2.32.

The company's revenue for the last twelve months as of Q1 2024 is reported at $21.6 million, although it has experienced a decline of 12.18% during this period. This contraction in revenue aligns with one of the InvestingPro Tips, which points out that Psychemedics has been trading at a low revenue valuation multiple. This tip suggests that the market is valuing the company's sales on the lower end compared to its peers, potentially indicating an undervalued stock or reflecting the market's tempered expectations for future revenue growth.

Another InvestingPro Tip that stands out is the company's record of not paying dividends to shareholders. This is consistent with the company's focus on reinvesting earnings into operations and growth initiatives rather than returning cash to shareholders, which may be a strategic choice given its current financial position and future plans.

For investors and analysts looking for a deeper dive into Psychemedics' financials and strategic position, InvestingPro offers additional tips and metrics, providing a comprehensive toolset for evaluating the company's prospects. There are more InvestingPro Tips available at https://www.investing.com/pro/PMD, which could offer further insights into the company's performance and strategy.

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