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In an SEC filing on Friday, THQ informed the agency that it plans to propose a reverse stock split at a June 29 shareholder meeting. The reverse stock split will collapse the number of shares outstanding on the market from 68.5 million down to 22.8 million (1:3 reduction), 13.7 million (1:5), or 6.8 million (1:10) depending on which ratio the board decides is best for the publisher. These proposed reductions would increase the stock price from its current (according to the paperwork filed with the SEC) $0.68 to $2.04, $3.39, or $6.80 respectively.
THQ’s board hopes to raise the price of the common share above $1.00 with this action. The NASDAQ, home of the THQ stock, requires that a company must consistently trade above $1.00 to maintain a listing on the market. In January, NASDAQ warned the Saints Row: The Third developer that it would be delisted from the index if it could not regain compliance with that minimum bid by July 23, 2012.
This will not increase THQ’s current market valuation of $41.75 million. In fact, investors typically view the reverse-split tactic as a desperate maneuver and could respond by decreasing the company’s perceived value even further.
THQ is still in the thick of a company-wide realignment after a tough fiscal 2012. In its last quarterly investor report, where it announced a $95 million operating loss for the year, the publisher reaffirmed its new commitment to AAA games.
“We exceeded our initial fourth quarter guidance for net sales, earnings and cash position, driven by high quality core games with a significant digital component, which is the blueprint for our future,” said THQ President and CEO Brian Farrell. “We have made significant changes to our business, and are on track to execute our strategy of delivering quality connected core gaming experiences, beginning with the sequel to the award-winning Darksiders in August.”
The publisher has cut back $30 million on its investment in kids’ titles and expects to sell through its stock of uDraw tablets during fiscal year 2013. In making these changes, the company racked up $62.8 million in “business realignment” expenses. The Nickelodeon and uDraw lineup of games appear to be the great boondoggles responsible for THQ’s current financial predicament.
THQ continues to publish downloadable content for Saints Row: The Third, including the recently released Penthouse Pack of characters featuring real models from Penthouse magazine. This August, the corporation will release Darksiders II for the PlayStation 3, Xbox 360, and PC. In September, the developer will release a new, stand-alone addition to the Saints Row: The Third universe titled Enter the Dominatrix. By the end of 2012, the annualized WWE wrestling sim will hit all major consoles.
For 2013, THQ is preparing Company of Heroes 2, Metro: Last Night, and South Park: The Game.