Ontrak, Inc. Announces Reverse Stock Split

Rhea-AI Summary

Ontrak Inc (NASDAQ: OTRK) announced a 1-for-15 reverse stock split effective September 23, 2024. This move aims to increase the bid price of common stock to regain compliance with Nasdaq's $1.00 minimum bid price requirement. The stock will continue trading under the symbol 'OTRK' with a new CUSIP number. The split will reduce outstanding shares from approximately 48.0 million to 3.2 million. No fractional shares will be issued; fractional interests will be rounded up to the next whole share. The split will not change stockholders' ownership percentages or voting power, except for minor adjustments due to fractional share treatment. Proportionate adjustments will be made to stock options, incentive plans, and warrants.

Positive

• Potential to regain compliance with Nasdaq's $1.00 minimum bid price requirement
• Maintains listing on Nasdaq Capital Market
• No change in stockholders' percentage ownership or voting power (except for minor fractional adjustments)

Negative

• Significant reduction in total outstanding shares (from 48.0 million to 3.2 million)
• Potential market perception issues associated with reverse stock splits
• Indicates underlying financial or market performance concerns necessitating the split

Insights

Financial Analyst

This reverse stock split is a strategic move by Ontrak to maintain its Nasdaq listing. While it doesn't change the company's fundamental value, it could have significant implications:

• The 1-for-15 split will reduce outstanding shares from 48 million to 3.2 million, potentially increasing the stock's perceived value.
• It's aimed at boosting the stock price above $1 to meet Nasdaq's minimum bid requirement, which is important for maintaining investor confidence and access to capital markets.
• However, reverse splits often signal financial distress and can lead to increased scrutiny from investors. The company needs to demonstrate improved financial performance to sustain any price increase.

Investors should monitor post-split trading patterns and any changes in institutional ownership, as these could indicate market sentiment towards Ontrak's future prospects.

Market Research Analyst

Ontrak's reverse stock split reflects broader challenges in the AI-powered healthcare sector:

• The move suggests Ontrak is struggling to maintain investor interest, possibly due to fierce competition or slow adoption of its AI-driven behavioral health solutions.
• The healthcare AI market is expected to grow at a CAGR of 37% through 2030, but Ontrak's need for this split indicates it may not be capturing this growth effectively.
• Post-split, the reduced float could lead to increased volatility, which might attract short-term traders but deter long-term investors seeking stability.

This split doesn't address underlying business challenges. Ontrak needs to demonstrate improved market penetration and financial performance to regain investor confidence in this high-potential but competitive sector.

Shares Expected to Begin Trading on Split-Adjusted Basis on September 23, 2024

MIAMI--(BUSINESS WIRE)-- Ontrak, Inc. (NASDAQ: OTRK), a leading AI-powered and technology-enabled behavioral healthcare company, today announced that it will implement a 1-for-15 reverse split of the issued shares of its common stock, effective at 12:01 a.m. Eastern Time on September 23, 2024. The Company's common stock is expected to begin trading on a split-adjusted basis when the market opens on September 23, 2024, and will continue to trade on The Nasdaq Capital Market under the symbol “OTRK.” The new CUSIP number for the common stock will be 683373 401.

The reverse stock split is intended to increase the bid price of the common stock to enable the Company to regain compliance with the $1.00 minimum bid price requirement for continued listing on The Nasdaq Capital Market. The Company’s stockholders authorized the reverse stock split at the Company’s annual meeting of stockholders held on September 10, 2024.

When the reverse stock split becomes effective, every 15 shares of the Company’s common stock issued and outstanding or held by the Company in treasury will automatically be combined and reclassified into one share of common stock. No fractional shares will be issued as a result of the reverse stock split. Stockholders who would otherwise be entitled to receive a fractional share will instead automatically have their fractional interests rounded up to the next whole share, after aggregating all the fractional interests of a holder resulting from the reverse stock split. The reverse stock split will affect all stockholders uniformly and will not change any stockholder’s percentage ownership interest or any stockholder’s proportionate voting power, except for immaterial changes that may result from the treatment of fractional shares. The reverse stock split will not change the number of authorized shares of the Company’s common stock or the par value per share of the Company’s common stock.

The reverse stock split will reduce the number of issued and outstanding shares of the Company’s common stock from approximately 48.0 million to approximately 3.2 million.

As a result of the reverse stock split, proportionate adjustments will be made to the per share exercise prices of, and the number of shares underlying, the Company’s outstanding stock options, as well as to the number of shares available for future awards granted under the Company’s stock incentive plans. In addition, proportionate adjustments will be made to the per share exercise prices of, and the number of shares underlying, outstanding warrants to purchase shares of the Company’s common stock.

The combination of, and reduction in, the issued shares of common stock as a result of the reverse stock split will occur automatically at the effective time of the reverse stock split without any additional action on the part of the Company’s stockholders. The Company's transfer agent, Equiniti Trust Company, LLC, is acting as the exchange agent for the reverse stock split and will send stockholders of record holding their shares electronically in book-entry form a transaction notice indicating the number of shares of common stock held after the reverse stock split. Stockholders who hold their shares through a broker, bank, or other nominee will have their positions adjusted to reflect the reverse stock split, subject to their broker, bank, or other nominee’s particular processes, and are not expected to be required to take any action in connection with the reverse stock split.

Additional information regarding the reverse stock split can be found in the Company’s definitive proxy statement for the annual meeting of stockholders of the Company held on September 10, 2024, which was filed with the U.S. Securities and Exchange Commission on July 29, 2024, a copy of which is available at www.sec.gov and on the Company's website.

About Ontrak

Ontrak Health (Nasdaq: OTRK) is a leading AI and technology-enabled behavioral healthcare company whose mission is to help improve the health and save the lives of as many people as possible. Ontrak identifies, engages, activates, and provides care pathways to treatment for the most vulnerable members of the behavioral health population who would otherwise fall through the cracks of the healthcare system. We engage individuals with anxiety, depression, substance use disorder, and chronic disease through personalized care coaching and customized care pathways that help them receive the treatment and advocacy they need, despite the socioeconomic, medical, and health system barriers that exacerbate the severity of their comorbid illnesses. The company's integrated intervention platform uses AI, predictive analytics, and digital interfaces combined with dozens of care coach engagements to deliver improved member health, better healthcare system utilization, and durable outcomes and savings to healthcare payors.

Forward-Looking Statements

The Company cautions you that all statements, other than statements of historical facts, contained in this press release, are forward-looking statements. Forward-looking statements, in some cases, can be identified by terms such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “design,” “intend,” “expect,” “could,” “plan,” “potential,” “predict,” “seek,” “should,” “would,” “contemplate,” “project,” “target,” “objective,” or the negative version of these words and similar expressions. In this press release, forward-looking statements include, but are not limited to, statements relating to the timing, completion and effect of the reverse stock split and the Company’s ability to regain compliance with Nasdaq’s minimum bid price requirement and continue to have its common stock listed on The Nasdaq Capital Market. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by the forward-looking statements in this press release, including, without limitation, the risk that Nasdaq may not process the reverse stock split on the expected timeline; the risk that after the reverse stock split the closing bid price of the Company’s common stock is not at least $1.00 per share for a minimum of ten consecutive trading sessions; the potential for Nasdaq to suspend trading in or to delist the Company’s common stock. Forward-looking statements are based upon the Company’s current expectations and involve assumptions that may never materialize or may prove to be incorrect. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. For a detailed description of risks and uncertainties the Company faces, you are encouraged to review the documents the Company files with the SEC including the Company’s recent filings on Form 8-K, Form 10-K and Form 10-Q. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they were made. The Company undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they were made, except as required by law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240919289940/en/

Company Contact:

Brandon LaVerne

Chief Executive Officer

blaverne@ontrakhealth.com

Investor Relations:

Ryan Halsted

Gilmartin Group

investors@ontrakhealth.com

Source: Ontrak, Inc.

FAQ

When will Ontrak's (OTRK) reverse stock split take effect?

Ontrak's 1-for-15 reverse stock split will take effect at 12:01 a.m. Eastern Time on September 23, 2024. The stock is expected to begin trading on a split-adjusted basis when the market opens on the same day.

What is the purpose of Ontrak's (OTRK) reverse stock split?

The primary purpose of Ontrak's reverse stock split is to increase the bid price of its common stock to regain compliance with Nasdaq's $1.00 minimum bid price requirement for continued listing on The Nasdaq Capital Market.

How will Ontrak's (OTRK) reverse stock split affect the number of outstanding shares?

Ontrak's reverse stock split will reduce the number of issued and outstanding shares from approximately 48.0 million to approximately 3.2 million.

Will Ontrak's (OTRK) stock symbol change after the reverse split?

No, Ontrak's stock will continue to trade on The Nasdaq Capital Market under the symbol 'OTRK' after the reverse split. However, it will have a new CUSIP number: 683373 401.