On Wednesday we wrote about the sudden rise in the share price of Capital Senior Living, doubling in value in a couple of weeks, which usually indicates rumors of some sort of a potential capital transaction. But the only news that came out was the stockholders’ approval of a 1-for-15 reverse stock split.
What was weird was that at the annual shareholders’ meeting they were given three options. Including the one above, there was also a 1-for-10 and a 1-for-20 split, approving all three and letting the Board decide which one to go with. We have never seen that happen.
With the 1-for-15 reverse split, Capital Senior Living will now have just 2,084,596 shares outstanding. We don’t yet know what impact having so few shares in the public float will have, but we don’t know of any other NYSE-traded companies with just 2 million shares, let alone a market cap of only $30 million or so.
Since hitting its near-term high of $1.38 per share this past Monday, the shares have lost 22% of their value as of early Thursday trading. Getting out of the sub-$1 per share price gets them back in compliance with the minimum share price requirement of the NYSE, but it probably will not help the price. In addition, those bottom-fisher investors who like the prospect of low-priced shares will most likely move on when the shares start trading at $15 a share or so.
While this achieves the goal of maintaining their listing, they have a lot more work to do to increase value.
