Atari’s Shareholders Approves Stock Split

Video Game Law Blog

January 08, 2007

As reported in March of last year, Atari received a delisting warning from NASDAQ pursuant to which Atari's stock would be delisted from NASDAQ unless its traded above $1 for more than 30 days.

In November Atari decided to do a ten for one reverse stock split of its stock, which means that each shareholder will receive one Atari share for every ten Atari shares it held prior to the reverse stock split. This does not change the value of the company but increases the value of each share tenfold. On January 4, 2007, Atari's shareholders approved the reverse stock split. 

It will be interesting to see how the Atari stock will fare in the future. Shortly before the reverse stock split, Atari's stock traded at $0.50 per share and theoretically after the stock split the stock should trade at $5 per share. Historically, this has not been the case and typically a reverse stock split has only provided a struggling issuer with temporarily relief as the stock price often will spiral towards below $1 per share shortly after a reverse stock split. However, if nothing else, the stock split will provide Atari's management with time to solve its financial and business problems before the stock dips below $1 again.

We will await the situation in suspense.