Capital Markets

Cure for Low Stock Quotes: A Reverse Split

Spate of companies giving it a try, often to keep their listing; lately, Progressive Gaming, Emrise, Revlon, and ExpressJet.
Stephen TaubSeptember 3, 2008

Reverse stock splits seem to be going forward for more and more companies — a sign that more share prices are dwindling into below-a-buck territory.

On Tuesday, Progressive Gaming International announced plans for a 1-for-8 reverse split of shares after the close of trading on Sept. 15, the same date Revlon Inc. has picked for the cosmetic company’s 1-for-10 move. And Emrise Corp., aims to seek shareholder approval on Nov. 6, although it hasn’t yet determined what ratio to apply for its reissuance.

Progressive, which provides products and services used in the gaming industry, said its action is designed to maintain compliance with regulatory agencies, its recent financing transactions and NASDAQ listing requirements. After the split, Progressive will have about 10.8 million shares issued and outstanding, including 2.1 million shares issuable under a convertible note debenture with International Game Technology, and about 800,000 shares issuable under option and warrant agreements. Progressive’s stock currently trades at $0.72, near the bottom of its 52-week range of $0.63 to $5.68.

Emrise, which makes electronic devices and communications equipment for aerospace, defense, industrial, and communications applications, said its plan also is designed to maintain its New York Stock Exchange ARCA listing, establish a share count more appropriate for the company’s size, and help shed the negative image of a company whose stock trades below $1. Its shares currently trade around $0.50, down from a 52-week high of $1.04.

Revlon, which previously announced its reverse split for Class A and Class B common, also has some bigger restructuring plans. The company, which is controlled by billionaire Ronald Perelman, said it plans to reduce its debt by $170 million by repaying the $170 million MacAndrews & Forbes Senior Subordinated Term Loan, which matures next Aug. 1. The debt reduction would be achieved in two steps. In the first step, Revlon will use $63 million of the net proceeds from the previously announced July 2008 sale of its Bozzano business in Brazil to repay $63 million of the $170 million M&F Term Loan. The remaining $30 million of net cash proceeds from the sale of the Bozzano business will be used by the company for general corporate purposes.

In the second step Revlon intends to launch, as early as in the fourth quarter of 2008, a $107 million equity rights offering that would allow stockholders to purchase additional shares of Revlon Class A common stock. Revlon intends to use the net proceeds to fully repay the remaining balance of the MacAndrews & Forbes loan.

Revlon has been trading under $1 for most of the year, but in recent weeks has spurted to the $1.40 range.

Meanwhile, last week we reported that ExpressJet Holdings Inc. will ask its shareholders to approve a 1-for-10 reverse stock split at a special meeting scheduled for Oct. 1. Its goal is to remain on the Big Board.

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