Earlyworks Announces Completion of ADS Ratio Change
Earlyworks announced the completion of a change in the ratio of its American Depositary Shares (ADSs) to ordinary shares. Effective May 16, 2024, the new ratio is one ADS representing five ordinary shares, instead of one ADS representing one share. This change aims to enhance liquidity and help meet Nasdaq's minimum bid price requirement. On the effective date, ADS holders with certificated shares were required to surrender them for cancellation and received one new ADS for every five old ones. Uncertificated ADSs were automatically exchanged. The company's ADSs continue trading under the ticker 'ELWS,' and no fractional new ADSs were issued. Instead, fractional entitlements were aggregated and sold, with net proceeds distributed to ADS holders.
- ADS ratio change may improve liquidity for ELWS shares.
- The change helps the company meet Nasdaq's minimum bid price requirement.
- Uncertificated ADSs were exchanged automatically, streamlining the process for holders.
- The trading price of ADSs is expected to increase proportionally.
- No assurance that the post-change ADS trading price will be proportionally equal to or greater than before.
- ADS holders with certificated shares had to surrender them, incurring potential inconvenience.
- Fractional ADSs were not issued; instead, fractional entitlements were sold, which may lead to minor financial discrepancies.
Insights
The change in the ADS ratio from one ADS representing one ordinary share to one ADS representing five ordinary shares effectively acts as a one-for-five reverse split. This action doesn't alter the proportional equity interest of ADS holders but is designed to increase the share price and ensure compliance with Nasdaq's minimum bid price requirements. It should be noted that while the increase in share price might seem beneficial, it does not change the intrinsic value of the company. The real impact will depend on market perception and whether the liquidity of the ADSs improves as intended.
From a short-term perspective, the price adjustment might attract new investors or retain current ones who are concerned with price thresholds. However, potential dilution concerns might arise if investors interpret this move as a sign of underlying financial weakness. Long-term implications include maintaining compliance with Nasdaq and possibly enhancing liquidity, but these are contingent on effective execution and positive market reception.
Overall, the true financial benefit or drawback will become apparent over the coming quarters as the market adjusts to this change.
From a market dynamics standpoint, this ADS ratio change is a strategic move to enhance the company's visibility and compliance with trading requirements. It is essential for investors to understand that such changes are often implemented by companies to prevent delisting from major stock exchanges like Nasdaq, which requires a minimum bid price. Although the ratio change itself does not affect the company's market capitalization, it aims to create a more favorable trading environment by potentially reducing the number of outstanding shares and increasing the per-share price.
For retail investors, this move means that while the total number of shares they hold will decrease, the overall value should remain the same assuming the market adjusts proportionally. One thing to watch will be the liquidity and volume of the ADSs post-adjustment, as these factors contribute significantly to the ease of buying and selling shares.
Long-term success of such a move will depend on sustained investor confidence and improved trading conditions, which aren't guaranteed and will need ongoing monitoring.
TOKYO, May 16, 2024 (GLOBE NEWSWIRE) -- Earlyworks Co., Ltd. (Nasdaq: ELWS) (the “Company” or “Earlyworks”), a Japanese company operating its proprietary private blockchain technology, Grid Ledger System (“GLS”), previously announced the Company’s plans to change the ratio of its American Depositary Shares (“ADSs”) to its ordinary shares from one (1) ADS, representing one (1) ordinary share, to one (1) ADS representing five (5) ordinary shares (the “ADS Ratio Change”). The ADS Ratio Change became effective on May 16, 2024 (the “Effective Date”).
For the Company's ADS holders, the change in the ADS Ratio has the same effect as a one-for-five reverse ADS split and has no impact on an ADS holder’s proportional equity interest in the Company. The change in the ADS Ratio is intended to further support the liquidity in the Company’s ADSs and to enable the Company to regain compliance with the Nasdaq minimum bid price requirement.
On the Effective Date, registered holders of the Company’s ADSs held in certificated form were required on a mandatory basis to surrender their certificated ADSs to Bank of New York Mellon, the depositary bank (the “Depositary”), for cancellation and received one (1) new ADS in exchange for every five (5) existing ADSs surrendered. Holders of uncertificated ADSs in the Direct Registration System (DRS) and The Depository Trust Company (DTC) had their ADSs automatically exchanged.
The exchange of every five (5) then-held (existing) ADSs for one (1) new ADS occurred automatically on the Effective Date, with the then-held ADSs being cancelled and new ADSs being issued by the Depositary. The Company’s ADSs continue to be traded on The Nasdaq Capital Market under the ticker symbol “ELWS.”
No fractional new ADSs were issued in connection with the change in the ADS Ratio. Instead, fractional entitlements to new ADSs will be aggregated and sold, and the net cash proceeds from the sale of the fractional ADS entitlements (after deduction of fees, taxes, and expenses) will be distributed to the applicable ADS holders by the Depositary.
As a result of the change in the ADS Ratio, the ADS trading price is expected to increase proportionally, although the Company can give no assurance that the ADS trading price after the change in the ADS Ratio will be proportionally equal to or greater than the previous ADS trading price prior to the change or that the change in the ADS Ratio will have any effect on the liquidity in the Company’s ADSs.
About Earlyworks Co., Ltd.
Earlyworks Co., Ltd. is a Japanese company operating its proprietary private blockchain technology, GLS, to leverage blockchain technology in various applications in a wide range of industries. GLS is a hybrid blockchain that combines the technical advantages of blockchain and database technology. GLS features high-speed processing, which can reach 0.016 seconds per transaction, tamper-resistance, security, zero server downtime, and versatile applications. The applicability of GLS is verified in multiple domains, including real estate, advertisement, telecommunications, metaverse, and financial services. The Company’s mission is to keep updating GLS and make it an infrastructure in the coming Web3/metaverse-like data society.
For more information, please visit the Company’s website: https://ir.e-arly.works/.
For inquiries about this release, please contact:
Earlyworks Co., Ltd.
Contact E-MAIL: ew-ir@e-arly.works
Forward-Looking Statements
Certain statements in this announcement are forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties and are based on the Company’s current expectations and projections about future events that the Company believes may affect its financial condition, results of operations, business strategy and financial needs. Investors can find many (but not all) of these statements by the use of words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “will,” “would,” “should,” “could,” “may,” or other similar expressions. The Company undertakes no obligation to update or revise publicly any forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the Company cautions investors that actual results may differ materially from the anticipated results and encourages investors to review other factors that may affect its future results in the Company’s registration statement and other filings with the U.S. Securities and Exchange Commission.
FAQ
What is the new ADS ratio for Earlyworks (ELWS)?
When did Earlyworks' ADS ratio change take effect?
Why did Earlyworks change its ADS ratio?
How were Earlyworks' ADS holders affected by the ratio change?
What happens to fractional ADS entitlements after the ratio change?
Will Earlyworks' ADS trading price increase after the ratio change?
