In a bid to raise the flagging price of South Financial Group stock, the board is urging shareholders to approve an amendment to the company’s articles of incorporation to effect a reverse stock split of major proportions, according to information filed with the US Securities and Exchange Commission Friday.
Shareholders will vote on the amendment at the company’s annual meeting, May 18 in Greenville.
If approved, the amendment would permit but not require the board to “effect a reverse stock split of our common stock at any time prior to November 30, 2010 by a ratio of not less than one-for-five and not more than one-for-fifty,” according to the SEC filing.
At the same time, the board will ask shareholders to approve an amendment to set the number of authorized shares of common stock at 1.35 billion shares.
“The Board of Director’s primary objective in proposing the Reverse Split is to raise the per share trading price of our common stock so as to cause and maintain compliance with the NASDAQ listing requirements,” according to the SEC filing.
Shares in South Financial closed at 69 cents Friday; It was trading for as much as $15 a share in 2007. Over the past two years TSFG has lost more than $1.3 billion.
Regarding the reverse stock split proposal, South Financial stated that NASDAQ listing requirements generally require a bid price in excess of $1 and the company believes the liquidity and marketability of its common stock will be adversely affected if it is not quoted on a national securities exchange.
In addition, it can be harder for investors to dispose of or to obtain accurate quotations on stock not listed on a national exchange.
Increasing the market price of TSFG’s stock will make it more attractive to a broader range of institutional and other investors, the company believes.
In terms of issuing extra stock, Greenville-based South Financial is currently authorized to issue 325 million shares of common stock. As of March 15, 2010, there were 215.6 million shares outstanding and nearly 109.4 million unissued.
Of the latter amount, about 18.2 million shares were reserved for issuance under our dividend reinvestment plan, employee stock purchase plan, equity incentive plans, conversions of outstanding preferred shares, and other outstanding warrant agreements, leaving 91.2 million shares available for future issuance.