SBS prepares for possible reverse split


Spanish Broadcasting System filed notice with the SEC that it has the necessary approvals from its board of directors and controlling shareholder, CEO Raul Alarcon, to effect a reverse stock split and regain compliance with Nasdaq’s $1 per share minimum bid rule. Ironically, SBS has since seen its stock move back above the buck mark.

The formal action by the SBS board of directors took place on April 12th. The company’s stock closed above one dollar two days later, on April 14th. If it continues to close above $1 through Tuesday, April 27th it will have closed above the mark for 10 consecutive market days and be back in Nasdaq’s good graces.

The notice being sent to shareholders leaves open the option that the board may use its discretion to abandon the reverse stock split. No formal vote by shareholders is necessary, since Alarcon, who holds majority voting control by virtue of his super-voting Class B stock, provided the board with his written consent to the reverse stock split on April 13th.

Should it be necessary to go ahead with the reverse stock split, it would be on the basis of up to one share for each five shares currently held, a ratio of 1-for-5. The company has nearly 41.6 million Class A shares outstanding and 23.4 million shares of Class B shares.

“Our Class A common stock is currently listed on the Nasdaq Global Market under the symbol ‘SBSA.’ Our Board of Directors authorized the reverse stock split of our Class A common stock and Class B common stock with the primary intent of increasing the per share trading price of our Class A common stock so that we may regain compliance with the $1.00 minimum bid price requirement set forth in Nasdaq Listing Rule 5450(a)(1). The Company has no specific plans, commitments, arrangements, understandings or agreements to issue any shares of Class A common stock or Class B common stock made available because of the reverse stock split. In addition, the Company currently has no intention to go private, and the reverse split is not intended to be the first step in a “going private transaction” and will not have the effect of a going private transaction under Rule 13e-3 of the Exchange Act,” SBS said in its SEC filing to explain the reasoning for the potential reverse stock split.

RBR-TVBR observation: Just like Sirius XM, the board at SBS now has the authority to order a reverse split. And just like Sirius XM, it appears unlikely any such reverse split will actually take place. As it happens, both moved back above a buck on April 14, so April 27th is the magic day that both will regain compliance with the Nasdaq minimum bid rule if their stock prices stay above the mark.