National CineMedia, an in-theater advertising firm that was founded and is largely owned by the nation’s largest exhibitors, has announced plans for a reverse stock split. The move is intended to boost the price of the company’s shares and avoid delisting by the Nasdaq market as it works through a voluntary Chapter 11 reorganization. The company’s announcement was made in an SEC filing, which did not specify the date of the special shareholders meeting yet or the terms of the reverse split. However, the exact ratio will be determined by the Board of the Company at its discretion.
The company’s shares have been in penny stock territory for many months and fell more than 10% today to close at 31 cents. They rose 3% to 32 cents in late trading. AMC Entertainment, which had also seen volatile trading, announced plans for a ten-for-one reverse stock split late last year. Reverse stock splits boost the price of a stock and reduce the total number of shares outstanding. They are typically done by companies looking to avoid delisting or improve their standing with investors. A number of shares, in this case still unspecified, are combined and reclassified into one share.
Stock splits, on the other hand, are common and generally a sign of progress as the stock price gets too high. Recent examples include Apple and Amazon.
National CineMedia was put on notice by Nasdaq last October that it had failed to meet minimum listing requirements by staying below $1 share for 30 consecutive days and was most recently given until July 26 to get into compliance. The company risks being delisted by the Nasdaq market, hence the need for a reverse stock split.
The company has also been involved in the ongoing bankruptcy of Cineworld, the parent of NCMI part-owner, Regal, which wanted to exit or change the parties’ long-term contract as part of its own Chapter 11. NCMI sued, but the case was shut down by Regal’s bankruptcy court judge. The companies reached a new, comprehensive agreement earlier this month. It will be part of Cineworld’s eventual restructuring plan when that’s approved by the judge, likely this summer.
In the filing, NCMI said, “Regal has agreed to timely vote its shares of capital stock in the Company in favor of the Reverse Stock Split.”
National CineMedia’s announcement of a reverse stock split comes as the company risks being delisted by the Nasdaq market and works through a voluntary Chapter 11 reorganization. The company’s shares have been in penny stock territory for many months, and the exact ratio of the reverse split will be determined by the Board of the Company at its discretion. The move is intended to boost the price of the company’s shares and reduce the total number of shares outstanding.
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