Capital Markets

Double Reverse? Splits Seen for Time Warner, Fannie

Media giant is looking at either a one-for-two or one-for-three split, while for the mortgage lender a split is one possible solution to the need t...
Roy HarrisDecember 1, 2008

Two giant companies — Time Warner Inc. and Fannie Mae — are looking at reverse stock splits as the answer to keeping their stock price from dipping into the danger zone.

Time Warner, the biggest media company in the world, said in its proxy statement that the planned reverse split of either one-for-two or one-for-three was designed to boost the share price after “the previously announced separation of Time Warner Cable Inc.” from the company. It noted that the marked price and trading ranges for Time Warner common could be significantly lower than the current market price at that point.

The split ratio will be determined by directors, and voted on at the Jan. 16, 2009, Time Warner annual meeting. On news of the reverse-split plans, Time Warner and Time Warner Cable share prices both fell fractionally, to $8.51 for Time Warner and $19.43 for Time Warner Cable as of 4:15 p.m., according to Bloomberg News.

Time Warner owns 84 percent of the cable company, and is exiting the business by distributing its shares to investors. According to the wire service, Time Warner Inc. had 3.59 billion shares outstanding on Oct. 29.

In the case of Fannie Mae, the mortgage lender got a 63-percent surge in its depressed share price on Friday, based on news that it was considering the reverse split. Of course, that represented only a 45-cent jump, to $1.16 a share.

On Wednesday, Fannie had notified the New York Stock Exchange that it planned to bring the share price up to Big Board standards. And investors considered the split a likely approach. Fannie said only that it was working with its regulator, the Federal Housing Finance Agency, to determine how to raise the price.