Before the stock split filing, Astra created a subsidiary to sidestep hiring rules and also offer financial leeway for borrowing.
American spacecraft engine manufacturer Astra Space Inc (NASDAQ: ASTR) intends to do a stock split at a 1-to-15 ratio and raise up to $65 million, according to a Monday filing with the United States Securities and Exchange Commission (SEC).
Per the filing, Astra plans to conduct the reverse stock split latest by October 2. A reverse stock split consolidates existing shares of a company’s stock, resulting in a smaller number of shares. Astra’s 1 for 15 reverse stock split means that every 15 shares a shareholder has will be converted to one. This typically increases the price of the company’s shares.
Like many other companies, Astra is conducting a reverse stock split to improve share prices. In this case, Astra’s decision comes as the company fell below the $1 minimum required to remain in active trading on the Nasdaq exchange.
In March, the Nasdaq gave Astra a deadline to get its share price past $1 or face delisting. At the time, Astra shares had fallen below $1 and remained that way for 30 consecutive business days, contravening the Nasdaq’s trading rules. As the deadline approached, Astra requested an extension. The company’s chief financial officer Axel Martinez stated that Astra plans to continue trading on the Nasdaq and was already considering a reverse stock split. Nasdaq eventually granted an extension until October 2, 2023.
MarketWatch data puts ASTR’s 5-day performance at a 4.25% increase. The stock has also climbed 4.42% in 1 month and 5.4% in three months. However, the space company’s stock has lost 7.33% year-to-date (YTD) and over 68% in one year. ASTR is currently at $0.3935 in after-hours trading after losing over 2% of its previous $0.4020 close.
Astra Stock Split Efforts to Be Supported by Subsidiary
Astra recently underwent a corporate restructuring that birthed a subsidiary spacecraft engine company. According to a TechCrunch report referencing someone familiar with the matter, Astra Spacecraft Engines, Inc was created for two reasons.
Firstly, the subsidiary helps Astra make better operations and financing decisions. According to law, US launch companies must strictly follow the International Traffic in Arms Regulations (ITAR), which significantly restricts several operations, including hiring. For instance, ITAR requires companies to get a license to hire any non-US person.
On the other hand, spacecraft component businesses operate under Export Administration Regulations (EAR), a set of rules similar to ITAR but more lenient with restrictions for hiring. Astra possibly created the subsidiary to circumvent ITAR restrictions, making it easy for the company to easily hire non-US talent.
Astra may also be making a play at expanding its finance options. For instance, Astra may access a loan against Astra Spacecraft Engines for more funds channeled toward research and development. This financing option is important for Astra, especially since its cash balance is waning. Astra’s cash reserve hit $62.7 million at the end of Q1 and may likely halve by the end of Q2.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
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