Cyngn (NASDAQ: CYN) stock should drop 10% today. As this is well within normal volatility for CYN stock perhaps not that many people will notice. But it is an oddity. For Cyngn is doing something that, other than changing the amount of stock in issue, doesn’t really seem to change anything else very much. It’s possibly a gesture but other than that, well?
What’s done at Cyngn: “Cyngn Inc., an autonomous vehicle (AV) technology company, develops autonomous driving software. The company is developing Enterprise Autonomy Suite, which consists of DriveMod, a modular industrial vehicle autonomous driving software; Cyngn Insight, a customer-facing tool suite for monitoring and managing AV fleets and generating/aggregating/analyzing data;” Well, OK, very much the coming thing. But note developing - it’s not developed as yet and they’re making significant losses as they develop. They also seem to have perhaps two quarters of runway left.
This then leads to this:
Cyngn stock price from Google Finance
A low stock price. OK, we know how to deal with that, have a reverse stock split and get that nominal stock price back up above the $1 minimum bid level necessary to remain on Nasdaq. Except this isn’t what they’re doing, not at all: “Cyngn Inc. (the "Company" or "Cyngn") (Nasdaq: CYN), a developer of AI-powered autonomous driving solutions for industrial applications, today announced that its board of directors has approved a pro rata 10% dividend of its common stock. The dividend will be paid on October 30, 2023 (the "Distribution Date") to all holders of record of the Company's common stock as of the close of business on October 23, 2023 (the "Record Date"). Stockholders will receive one share of Cyngn common stock for every ten shares of Cyngn common stock they hold on the Record Date.”
They are, in fact, diluting the stock. Which is an odd thing to be doing at this point. There’s no real point to it either. 10 shares at 40 cents or 11 shares at 36 cents makes very little difference to anyone. It also doesn’t do anything at all to solve that Nasdaq problem. They say: “ By declaring this first-time stock dividend it's our way of rewarding and thanking our shareholders for their continued support.” well, yes. But as we say, it doesn’t in fact do anything of the sort. Which isn’t a good sign really. If management thinks that an 11 for 10 stock split does anything at all for a loss making company (if this were a way of distributing profit that would be different) then perhaps we need to reconfigure our ideas about the financial markets competence of that management.
The only way we can make this work logically is if some insiders are constrained from selling their holdings but won’t be constrained on selling the dividend stock. But that doesn’t inspire great confidence either - for it would mean they could sell up to 10% of their Cyngn holdings unconstrained.
