Cumulus’ Eight-Ball: Reverse Stock Split Set

By on Sep, 11 2016 with Comments 0

By Adam R Jacobson
RBR + TVBR

Cumulus Media has put the wheels in motion on a reverse stock split that will see one share divided into eight parts.

In a “Pre 14K” filing filed with the U.S. Securities and Exchange Commission on Friday (Sept. 9), Cumulus Media says it intends to engage in a reverse split of its Class A common stock, Class B common stock and Class C common stock – each at a ratio of one share for each eight shares.

The move would reduce the number of authorized shares of CMLS common stock, and theoretically move it out of the “Penny Stock” category.

A special shareholders meeting is being scheduled, where individual and institutional holders of Cumulus shares may vote in person or by proxy.

The date and time of the special meeting was not provided in the filing. Nasdaq has indicated that Cumulus has until early November for its shares to rise above the minimum required value of $1.

In the event there are not sufficient votes at the time of the special meeting to approve the reverse stock split, Cumulus will adjourn the meeting in order to solicit additional proxies.

0001193125-16-706557_g249940img1Only shareholders of Class A common stock or Class C common stock at the close of business on September 9, 2016 may participate in the vote.

In order for the special shareholders meeting to be validly held, holders of Class A and Class C common stock will vote together as a single class.

With a “record date” of September 9, Cumulus had 233,798,935 outstanding shares of Class A Common Stock, zero outstanding shares of Class B Common Stock, and 644,871 outstanding shares of Class C Common Stock.

Crestview Radio Investors owns some 30% of Cumulus stock.  Greywolf Event Driven Master Fund has  5.5% of the company’s shares. Company co-founder and former CEO Lewis W. Dickey, Jr. holds some 11% of Cumulus shares. He holds 13.5% voting control.

WHAT CUMULUS SHARES WOULD BE WORTH

As of Friday’s Closing Bell, Cumulus shares sat at $0.3553. The reverse stock split would aggregate eight shares at this value, creating one share valued at $2.84 while greatly reducing the number of outstanding shares.

For instance, an individual with 100 shares of stock as of Sept. 9 would have 12.5 shares of “new” Cumulus stock. But, they would be compensated for the value of the original shares.

The move is strategically important as it would eradicate any delisting concerns.

It would also negate the No. 1 rating CMLS shares received as a “penny stock” among the hedge funds followed by Insider Monkey at the end of the second quarter.

Insider Monkey notes, “The number of smart money investors with stakes in the company increased to 15 from 13 quarter-on-quarter, while the overall value of those stakes rose by 78% quarter-over-quarter to $29.36 million — despite a drop of 33% in the value of Cumulus Media’s shares. The 15 hedge funds stockpiled 40% of the company’s outstanding shares.”

Cumulus Media, a leading player in the radio broadcasting industry, has seen its shares advance by 9% so far in 2016. The Atlanta-based company reported net revenue of $287.2 million for the second quarter, down from $299.3 million recorded in the same period of the prior year.
The decrease reflects lower broadcasting advertising, digital advertising and license fees, partly offset by higher political advertising revenue.
In addition to above-mentioned institutional shareholders, James Dondero’s Highland Capital Management owned 5.80 million shares of  CMLS stock as of the end of the April-to-June period.

About The Author: Adam R Jacobson is a veteran radio industry journalist and advertising industry analyst with general, multicultural and Hispanic market expertise. From 1996 to 2006 he served as an editor at Radio & Records.

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