To head off a potential delisting of its stock by Nasdaq because of its low stock price, Spanish Broadcasting System has asked shareholders to approve a reverse stock split. If enacted, a reverse split would likely put SBS back in compliance with the minimum bid price of $1, albeit with many fewer shares available to trade.
As previously reported, SBS has requested a hearing before the Nasdaq Listing Qualification Panel, delaying any delisting action. That hearing is now scheduled for May 12th. “At the hearing, we will provide Nasdaq with a specific plan of how we intended to regain compliance with the minimum bid price deficiency, including a time frame for completion of such plan. We will include in that plan a proposed reverse stock split to increase the per share trading price of our Class A common stock if our stock price did not meet the minimum bid requirements,” the company said in its proxy for its annual shareholders meeting. That annual meeting, with the vote on authorizing the reverse split, is set for June 1st in Coconut Grove, FL.
If shareholders give the OK, the SBS board would then be able to enact a reverse split of not less than one-for-five and not more than one-for-ten. In theory, a one-for-five reverse split would result in a stock price five times of what the shares were trading at previously, although things don’t always work out that way on Wall Street.
While the reverse split would be necessary to preserve the Nasdaq listing if the SBS stock price remains below a buck, the proxy says the board sees other advantages in taking the action. “We also believe that the reverse stock split should make our Class A common stock more attractive to institutional and other investors, as the current market price of our Class A common stock may affect its acceptability to certain institutional investors, professional investors and other members of the investing public. In addition, many institutional investors may be prohibited from purchasing stocks below certain minimum price levels. For the same reason, brokers may be reluctant to recommend lower-price stocks to their clients, or may discourage their clients from purchasing such stocks. Other investors may be dissuaded from purchasing lower-price stocks because the commission, as a percentage of the total transaction, tends to be higher for such stocks. To the extent that the price per share of our Class A common stock remains at a higher per share price as a result of the reverse stock split, some of these concerns may be ameliorated,” the proxy stated.
While shareholders are being asked to give the OK, the board also reserves the right to abandon the reverse split if it determines that the move would not be in the best interests of the company and its shareholders.
The SBS stock price briefly rose above the $1 Nasdaq minimum in January and March, but never for the 10 consecutive trading days required to regain compliance with the exchange’s rule. It closed Thursday (4/21) at 79 cents.
RBR-TVBR observation: For a while it looked like SBS would ride the economic recovery back above the $1 stock price hurdle, as did some other broadcasters who’d gotten delisting warnings during the recession. But it was not to be. SBS reported Q4 results which trailed its general market radio competitors, with radio revenues actually down 5% for the quarter. That’s pretty much stymied any stock rally in recent weeks.