With many radio stocks trading deep into penny stock territory, some companies are looking to reverse sock splits as a way to make their shares more appealing on Wall Street. Radio One is the latest to ask its shareholders to approve a reverse split.
Saga Communications recently did a reverse split and Sirius XM has one pending. Westwood One shareholders are due to vote on one. Now Radio One is asking its shareholders to approve an amendment to the company’s certificate of incorporation to allow for a reverse split.
If approved at the Radio One annual shareholders meeting on September 17th, the Board of Directors would then be able to order a reverse split in a range from one share for each five held to one share for each 50 held.
“Our board of directors believes that stockholder approval of an exchange ratio range (rather than an exact exchange ratio) provides the board with maximum flexibility to achieve the purposes of the reverse stock split. If the stockholders approve Proposal 3, the reverse stock split will be effected, if at all, only upon a determination by the board of directors that the reverse stock split is in the Company’s and the stockholders’ best interests at that time,” says the proxy being sent to shareholders.
Radio One notes that in order to maintain the company’s Nasdaq listing, its stock must trade above $1, which hasn’t been the case for Radio One since April 27th. Nasdaq’s suspension of the minimum price rule, in light of the tough US economy, is set to expire this Friday (7/31).
“The purpose of the reverse stock split is to increase the per share trading value of both our Class A and Class D common stock. Our board of directors intends to effect the proposed reverse stock split only if it believes that a decrease in the number of shares outstanding is likely to improve the trading prices for our Class A and Class D common stock, and only if the implementation of a reverse stock split is determined by the board of directors to be in the best interests of the Company and its stockholders. Our board of directors may exercise its discretion not to implement a reverse stock split,” the proxy noted.
The amendment requires approval by a majority of Radio One’s Class A shares, which are publicly traded but few in number, and a majority of its Class B shares, all of which are held by Chair Cathy Hughes and CEO Alfred Liggins, her son. Radio One’s most widely traded shares, Class D, are non-voting.
RBR/TVBR observation: Not fun for shareholders, least of all for Chair Cathy Hughes and CEO Alfred Liggins, who are far and away the biggest shareholders. But this is the reality that many companies are facing today.