Questions
I should have more shares. Why does it appear that shares of Datchat, Inc. ("Company" or "our") common stock are missing from my account?
On July 28, 2021, DATCHAT, INC. filed a certificate of change to our amended and restated certificate of incorporation, with the Secretary of State of the State of Nevada to effectuate a one-for-two (1:2) reverse stock split (the “Reverse Stock Split”) of our common stock without any change to its par value. The Reverse Split became effective on upon such filing. No fractional shares were issued in connection with the Reverse Stock Split as all fractional shares were rounded up to the next whole share. All share and per share amounts of our common stock listed in this prospectus have been adjusted to give effect to the Reverse Stock Split. (source: https://sec.report/Document/0001520138-21-000378/)
On September 19, 2023, DatChat, Inc. (the “Company”) filed a Certificate of Change (the “Certificate of Change”) with the Secretary of State of the State of Nevada to effectuate a 1-for-10 reverse stock split (the “Reverse Stock Split”) of the Company’s issued and outstanding and authorized shares of common stock, par value $0.0001 per share (“Common Stock”). The Reverse Stock Split will become effective at 4:01p.m., Eastern Time, on September 19, 2023, and the Company’s Common Stock is expected to begin trading on a split-adjusted basis at the open of trading on The Nasdaq Capital Market on September 20, 2023.
When the Reverse Stock Split becomes effective, (i) every 10 shares of Common Stock issued and outstanding will automatically be reclassified and combined into one share of Common Stock, without any change in the par value per share such that the Company will have approximately 2,740,419 issued and outstanding shares of Common Stock, and (ii) a proportionate adjustment will be made to the Company’s authorized shares of Common Stock such that the Company shall have 18,000,000 authorized shares of Common Stock. In addition, a proportionate adjustment will be made to the per share exercise price and the number of shares issuable upon the exercise of all outstanding stock options and warrants to purchase shares of Common Stock and the number of shares reserved for issuance pursuant to the Company’s equity incentive compensation plans. No fractional shares of Common Stock will be issued in connection with the Reverse Stock Split. Stockholders who otherwise would have been entitled to receive fractional shares of Common Stock will have their holdings rounded up to the next whole share. (source: https://www.sec.gov/ix?doc=/Archives/edgar/data/1648960/000152013823000397/dats-20230919_8k.htm)
The Company’s Common Stock will continue to trade on The Nasdaq Capital Market under the existing symbol “DATS”, but the security has been assigned a new CUSIP number (23816M206).
What is a Reverse Stock Split and why would a company do this?
“When a company completes a reverse stock split, each outstanding share of the company is converted into a fraction of a share. For example, if a company declares a one for ten reverse stock split, every ten shares that you own will be converted into a single share. If you owned 10,000 shares of the company before the reverse stock split, you will own a total of 1,000 shares after the reverse stock split.
A company may declare a reverse stock split in an effort to increase the trading price of its shares – for example, when it believes the trading price is too low to attract investors to purchase shares, or in an attempt to regain compliance with minimum bid price requirements of an exchange on which its shares trade.
(source: https://www.investor.gov/introduction-investing/investing-basics/glossary/reverse-stock-splits)
How does my cost basis change with a stock split?
Stock splits don't create a taxable event; you merely receive more stock in the case of a forward stock split or less stock in the case of a reverse stock split, evidencing the same ownership interest in the company that issued the stock. You don't report income until you sell the stock. Your overall basis doesn't change as a result of a stock split, but your per share basis changes. You'll need to adjust your basis per share of the stock.
For example, you own 100 common stock shares of ACB Corp that you purchased for $2 per share for a total cost or overall basis of $200. In a 2-for-1 reverse stock split, ABC Corp reduces all outstanding common stock shareholder positions by 50% or for each 2 common stock shares owned prior to the split, you will receive 1 post-split common stock share. You now own 50 shares, but your total overall basis is still $200. Following the stock split, you must reallocate your basis between the original shares and the shares newly acquired in the stock split. Your basis per share is now $4.00 ($200 divided by 50).