The plan by big U.S. radio owner Cumulus Media to boost its share price through a reverse stock split got the go-ahead Wednesday at a special meeting of the company’s stockholders. The approval means every eight shares of each class of Cumulus stock will now be converted into one share.
Cumulus says the move primarily is aimed at increasing the trading price of its Class A common stock to permit the company to regain compliance with NASDAQ market listing requirements. If you hold Cumulus stock, the total value of your shares does not change due to this measure, but the number of shares are consolidated so that the per-share price is higher.
[Click to read: What is a reverse stock split?]
This is generally a defensive measure used when a company is going through difficult financial times, as Cumulus has. Its stock — CMLS on NASDAQ — has faltered below the minimum listing price of $1 per share since last year. NASDAQ sent Cumulus a de-listing notice in late 2015 and the company has been exploring options to regain compliance.
In May 2016 the company’s stock moved off the Global Select NASDAQ exchange for the lower-ranked Capital Market exchange. That gave Cumulus another 180 days to regain compliance, until early November.
Cumulus President/CEO Mary Berner’s turnaround plan for the broadcaster has so far not helped the company’s stock price. When Berner joined in September a year ago, the price was hovering around $0.75 per share. The broadcaster’s stock closed Tuesday at $0.33 a share. The reverse split was to be effective at 5 p.m. Eastern time Wednesday, according to a Cumulus release. If the reverse stock split works as expected, according to simple math Cumulus stock should open on Thursday at somewhere around $2.60 per share.
Cumulus owns 450 radio stations and operates in 90 U.S. media markets. In August, while reporting revenue declines in the prior financial quarter, Berner said that the turnaround strategy “is gaining measurable traction with significant ratings growth, improved employee engagement, reduced turnover and enhanced operational effectiveness.”
Cumulus Reports Down Q2, Citing “Substantial Challenges” (Aug. 2016)