It was widely expected, given the company’s stock performance over the last several months. With a SEC filing, it is now official. Audacy Corp. is seeking shareholder approval to engineer a reverse stock split, a move necessary to maintain NYSE compliance or risk getting booted from the exchange.
The last time a reverse stock split transpired, it involved Cumulus Media — before it sought Chapter 11 bankruptcy protection. That was in October 2016, and also saw a shareholder vote on the Jewish holiday of Yom Kippur that resulted in a reverse split of Cumulus’ Class A common stock, Class B common stock and Class C common stock – each at a ratio of one share for each eight shares.
Are Audacy CEO David Field and CFO Rich Schmaeling (pictured, top left) seeking a nearly identical path to keep from getting booted from the NYSE?
Perhaps. Audacy shareholders will have the opportunity to cast their vote during a virtual annual stockholders’ meeting conducted via live webcast on Tuesday, May 14. Among the six items of business is an amendment, requiring shareholder approval, to move forward with a reverse stock split of Audacy’s outstanding Class A and Class B Common Stock — at a ratio within a range between one-for-two and one-for-30, subject to and as determined by a committee appointed by our Board of Directors.
Cash payments will be given for fractional shares. If the reverse stock split is approved, the price must go above $1 and remain there for 30 days to fulfill the market obligation.
That’s a huge window, and with Tuesday’s trading nearing its close AUD was trading at $0.1179 — up more than 9% from Monday but still at a value where a 1-for-10 reverse stock split would still put Audacy in peril.
As of today, the maximum value being placed on Audacy shares would be $3.537 — assuming AUD is where it is today in six weeks.
If shareholders say no to the reverse stock split, which would dilute their shares, NYSE delisting will occur. As of March 17, there were 147,067,534 shares of our Class A Common Stock and 4,045,199 shares of our Class B Common Stock issued and outstanding.
Audacy made it clear that a reverse stock split is not a cure-all for AUD’s noncompliance. In the case of Cumulus, CMLS began losing share value just days after it completed its 1-for-8 reverse stock split. CMLS shares had been drifting between 31 cents and 36 cents per share.
Eleven months after initiating the 1-for-8 stock split, Cumulus filed for voluntary Chapter 11 bankruptcy protection, allowing it to reorganize and shed roughly $2 billion in debt.
For Audacy today, its stock price is a third of the value Cumulus was at the time of its stock split. And, while no maturities are coming for several years, some investors may be unsettled by the $1,812,415,000 owed to lenders. Audacy’s Term B-2 Loan, one component of its Senior Debt, totals $632.42 million; the Senior Debt Revolver is higher, at $180 million compared to $97.73 million at the end of 2021.
While $10 million was sliced from the Senior Secured Notes due 2027, some $460 million remain. Then, there are Senior Secured Notes due 2029, totaling $540 million.
The reverse stock split vote is the second agenda item at Audacy’s annual shareholders’ meeting. The first order of business is the election of three directors, in Board Class III, each for a three-year term expiring at the 2026 annual meeting of shareholders or until each such director’s successor is duly elected and qualified.
Nominated are CEO Field; his father, company founder Joseph M. Field; and David J. Berkman. Berkman, 61, has served as one of Audacy’s Directors since the company’s initial public offering as Entercom in January 1999.
Following the reverse stock split vote is a “Say on Pay” advisory vote on executive compensation; an advisory vote on the frequency of future advisory votes on executive compensation; and the ratification of Grant Thornton LLP as Audacy’s independent registered public accounting firm for fiscal 2023.
