Perhaps one of the most important pieces of information that an investor needs to decide whether a company is fairly valued or not is the number of shares outstanding, particularly the number of fully diluted shares outstanding. With that information, and the stock price, an investor can calculate the market cap of the company and use earnings and book value figures to calculate valuation ratios or run a DCF analyis.

I just ran across one company that evidently does not think that is important information. Cytocore (CYOE.OB) is not unlike many of the other companies that arouse my ire. It is an OTC-traded microcap with little in the way of book value or revenues. I came across it while searching for more companies to short sell (a favorite hobby of mine). What struck me about Cytocore is that the company has not published figures anywhere that reveal the number of shares outstanding and thus the company’s market cap.

Cytocore (which has the least informative website I have ever seen) had 353 million shares outstanding as of its last 10Q, which was filed on November 12, 2007. The company also had a proxy statement announcing a meeting of stockholders on November 19, 2007 to vote on whether or not to effect a reverse stock split. The proxy did not have an exact proportion for the split, rather it was a range of “not less than one-for-five and not more than one-for-ten.” Since then, the company has not announced, in either a press release or SEC filing, the exact proportion of the reverse stock split and the resulting number of shares outstanding, or even if the resolution passed. Depending upon what happened, the company could have a market cap of anywhere from $100 million to $1 billion.

While the question of whether to invest is easily answered–the company is overvalued at any market cap–the question of why this company would fail to disclose something so important is difficult to answer. It appears that the company put out a press release, but it never filed an 8k to document the press release (as appears to be required by law). By the way, Cytocore effected a 1 for 10 reverse stock split (as shown in the above-linked press release fragment).

The Forbes Informer published an article that lambasted Cytocore almost a year ago. Unsurprisingly, since then, Cytocore’s ‘investors’ have underperformed the market by 55%.

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Michael Goode

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