Hoping to keep its stock price above $1 per share and preserve its New York Stock Exchange listing, Furniture Brands International is asking shareholders to approve a reverse stock split.
Shareholders were notified in a recent proxy statement that two such proposals will be voted on at the company's annual meeting May 2. One authorizes a 1-for-5 reserve split and the other a 1-for-7 reserve spilt.
If approved, the company's board of directors would have the authority to implement either of the reverse splits before the 2014 annual meeting. However, the board would still have the option of taking no action if it later decides a reverse split "is not in our best interest or the best interest of our stockholders," the proxy statement said.
A reverse split reduces the number of outstanding shares and therefore increases the price per share. For example, a 1-for-5 split means a stockholder with 100 shares priced at $1 per share would have 20 shares priced at $5 per share after the split.
New York Stock Exchange rules require the average closing price of a company's stock to be at least $1 per share over 30 consecutive trading days. Furniture Brands stock has traded in the $1 range for several months, and the company was notified by the stock exchange on Dec. 18 that its share price wasn't meeting the price requirement.
The price moved above $1 in January, and the company notified the stock exchange on Feb. 5 that it was once again in compliance. However, the price flirted with the $1 level again in March and closed at 91 cents per share on March 8.
It closed in trading Monday at $1.20 per share.
In addition to preserving its NYSE listing, Furniture Brands said a higher share price could also make its stock more attractive to institutional investors and reduce stock price volatility.
