Here's A High Risk High Reward Delcath Systems, Inc. (NASDAQ:DCTH) Play

Delcath Systems, Inc. (NASDAQ:DCTH) President and Chief Executive Officer, Jennifer K. Simpson, just issued a letter to shareholders and put out this release detailing the issue. Chances are many reading will already be familiar with this one and, for those that are, there's an equally good chance that subject of the letter to shareholders will already be apparent.For those new to the company, Delcath is a development stage biotechnology company that is working to bring a variety of oncology type treatments market but that has made headlines for reasons outside of its development pipeline over the last problems. Most notably, Delcath ran up to just shy of $0.50 a share back in June on the shareholders had success voting down a reverse split.The company has since declined but maintains a market capitalization substantially above that which it held before the reverse split was voted down and has become a favorite of day traders over the last few months, with an ongoing battle between bulls and shorts injecting considerable daily volatility into the stock. DCTH Daily ChartThe just-released letter to shareholders is a last ditch attempt by management to attract the number of yes votes it needs in order to overturn the above-mentioned decision and to get a reverse split approved near-term.Shareholders are hoping for a replay of the previous outcome – that is, management being unable to garner enough votes in favor of the proxy detailing the split and, as a result, being unable to put it into effect. If this happens, there is a nice short-term play on Delcath as markets respond to the event and send the company running to the upside. With a considerable short side pressure in effect right now (and with a good chance that a large portion of these shorts are naked), it's not going to take much to really get the stock moving.Of course, management is doing everything it can to avoid this and the latest letter to shareholders is an example of its efforts. In the interest of balance, there are some justifiable points that can be used to argue in favor of a split. Most notably, the company is trading below minimum bid for a NASDAQ listing right now and a reverse split will remedy this issue almost immediately.The same is true of the authorized share limit, which the company is reached, meaning it is unable to issue equity to raise capital. That's not necessarily a bad thing for shareholders – an equity raise is dilutive and this is a base of shareholders that has already had to absorb a substantial amount of dilution over the past few years.With that said, however development stage biotechnology companies like this one need to raise capital in order to fund their pipelines through to completion and without any shares authorized for issue, Delcath is going to be able to do that.So what happens if the split goes ahead?Chances are we will see a near term depreciation in value (adjusted for whatever split ratio management decides to put into effect) but, longer term, it is tough to see this company staying at current levels (again, adjusted for split).Whatever is going on behind the curtain, Delcath's oncology platform is strong and we don't think the company will have any trouble picking up a partner with which it can push forward said platform, even if it is unable to raise money on favorable terms.That's all speculative, however. The real short-term play here is the interesting one. A long position in anticipation of shareholders voting down a split company squeezing out its large short base very quickly and very dramatically.A risky one but, for the more risk tolerant trader out there, one that could be well worth a look.Vote day is September 7.Check out our previous coverage of DCTH here. We will be updating our subscribers as soon as we know more. For the latest updates on DCTH, sign up below!Image courtesy of Eelke via FlickrDisclosure: We have no position in DCTH and have not been compensated for this article.