Delcath Systems, Inc. (FRA: DV32) (Previously NASDAQ: DCTH) is having yet another rough start to the trading session this morning. As the company continues to burn bridges with its investors, it seems to be on a bit of a freefall as of late. As is normally the case, our partners at Trade Ideas were the first to alert us to today's declines. Currently, DV32 (previously DCTH) is trading at $0.06 per share after a loss of 0.002 per share (3.23%) thus far.
The Problem With DV32 (DCTH) Is A Big Disconnect Between Management And Investors
As mentioned above, Delcath Systems has been finding its way downward in the market as of late, and for good reason. There has been a big disconnect between investor goals and the goals of management recently. Most recently, the disconnect has had to do with plans to process a reverse split.
You see, DV32 (DCTH) wanted to process a 500-to-1 reverse split, bringing the value of their stock well above the required $1 per share and opening the door to funds as well as eliminating some near-term debt obligations. However, in order for this to happen, the company needed approval from investors, and that vote didn't go well.
That wasn't for lack of the company trying to push investors in the direction that they wanted them to go. Not only was there an extension to the deadline on the vote when it was clear that investors planned on voting no, but DV32 (DCTH) also all but harassed investors to try to get them to change their votes.
Through the use of a call center, Delcath Systems continuously called investors in an attempt to get them to change their votes. I've received several messages from investors informing me that not only were they calling, but they were calling several times per day and largely harassing investors into voting yes. I've also received a couple of recorded phone calls in which the call center clearly misled investors with regard to voting deadlines and showing that c-level management was unaware of just what the representatives of these call centers were doing - or at least they claim to be unaware. Nonetheless, the harassment continued.
The Reverse Split Failed Anyway
Regardless of how much DV32 (DCTH) tried to get investors to vote yes on the reverse split, they ultimately failed. As a result, the company recently reached out to investors with a press release, letting them know that the company would be delisted from the NASDAQ and would commence trading on the OTC market. However, there were a few things that investors wanted to see that Delcath Systems management didn't offer.
Throughout the time I've been following the company, I've seen several messages and even a petition where investors were hoping that the management at the company would reduce their exorbitant salaries. However, at the moment, these salaries remain the same. Also, none of the management at DV32 (DCTH) have any skin in the game. Investors would like for them to invest, or take some of their pay in shares. However, that hasn't happened either.
The Problem Isn't In The Product
If there is one thing that DV32 (DCTH) does have going for them, it's their product. The company has received approval in Europe for Chemosat, and treatments in the region are going well. The company is also looking for approval in the United States. However, considering the current financial standpoint of the company, it may be difficult for the company to stay afloat through the next regulatory catalyst.
The truth is that I have no connection to the c-suite at Delcath Systems, nor any sources inside the company. So, I know just about as much about their future plans as you do. However, considering that the reverse split was voted down and the financial position of the company, I wouldn't be surprised to see the company put itself up for sale. After all, their intellectual property is valuable, regardless of how poorly management is performing. If a strong management team took over the product, we could see great things happen. However, because of various measures that the company has in place to protect management, the only way this is likely to happen is if the company were to sell its assets or decide to sell itself!
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What We'll Be Watching For Ahead
Moving forward, the CNA Finance team will be keeping a close eye on DV32 (DCTH). In particular, we're interested in seeing what moves the company makes to stay afloat in the months ahead. We're also watching to see if management makes the changes that the investors would like to see or considers selling the company. Nonetheless, we'll continue to follow the story closely and bring the news to you as it breaks!
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