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Struggling payment security firm Trintech announced a one-for-four reverse split of its American depository shares but followed the news with a profit warning.
The reverse split in Trintech's stock will take place at the opening of the market on Friday, 24 May 2002, and after the split each ordinary Trintech share will be worth two American depository shares (ADS). Trintech's chairman and chief executive officer, Cyril McGuire, said that the move was being made to bolster the value of Trintech shares on the Nasdaq.
Trintech stock has been trading at below USD1 since 28 March 2002, and according to Nasdaq rules, if a company's shares trade below USD1 for more than 30 consecutive days, it will be forced to de-list. However, there is currently a temporary, post 11 September rule in effect that allows shares to trade below USD1 for up to 90 days.
Trintech shares, which closed at USD0.65 on Tuesday, are trading at just over half the value they could be sold for in early January. They are also substantially down from their 52-week high of USD3.10 in June 2001.
Trintech will certainly need to do something to bump up share prices, particularly since the firm released a profit warning along with the reverse split on Tuesday. For Trintech's fiscal first quarter, pro forma net loss is expected to be in the range of USD4 million to USD5 million instead of the USD2 million to USD3 million range the company had previously offered.
The company also announced that revenues for the first quarter will be less than previously expected. Blaming a deterioration of its European POS (Point of Sale) business line, the company now expects that Q1 revenues will be in the range of USD9.5 million to USD10.5 million. Analysts were calling for revenues of around USD15.8 million.
"It's significant that they are saying there is weakness in POS. That division is more established and has been stronger for them in the past," explained Gerry Hennigan, technology analyst with Goodbody Stockbrokers in Dublin. "It now appears that the weakness that the company has experienced in software licensing is spreading to other parts of the business."
One bright spot for the firm however is its cash usage figure for Q1, which will be in the range of USD7.0 million to USD8.0 million as previously guided, down from last quarter's USD13 million figure.
The last few months have not been easy for Trintech. Since the start of the year Trintech has replaced its chief executive, John McGuire, and more recently it was removed from the Neuer Markt's NEMAX50 Index, which subsequently resulted in its removal from many portfolio managers' core stocks.
Additionally, in the firm's last set of results released in February, Trintech said its fourth-quarter loss for the three months ended 31 January 2002 was USD2.66 million, or USD0.04 per share, worse than analysts' original expectations of USD0.03 per share. At that time, the employer of 500 worldwide, including 250 in Ireland, said further job cuts were in the works to make the company profitable again.
"The management team is 100 percent focussed on our core operations and we are taking the necessary actions to place the company on a solid foundation to improve shareholder value," said Cyril McGuire, chairman and chief executive, in a statement on Wednesday. "Having taken decisive and aggressive cost reduction measures, we remain determined to achieve our goal of being pro forma P&L cash neutral for the remainder of the fiscal year."
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