All eyes are on Bed Bath & Beyond (NASDAQ:BBBY) after the struggling retailer announced that it would hold a special meeting of stockholders with a record date of March 27. This means that shareholders who own shares of BBBY stock as of March 27 will be eligible to cast a vote for the meeting. The date of the meeting was not immediately disclosed. During the meeting, the votes for two proposals will be revealed:
- A reverse stock split in a range between 1-for-5 and 1-for-10. Bed Bath & Beyond’s board will have the final say in determining the revere split ratio.
- An adjournment of the meeting if the reverse split proposal receives insufficient approval votes.
Bed Bath’s board has urged shareholders to approve both proposals.
Dear BBBY Stock Fans, Mark Your Calendars for March 27
In a regulatory filing, the company stated that a reverse split would result in a higher per-share price and subsequently “generate greater investor interest in the company.” CEO Sue Gove added that the reverse split is part of Bed Bath’s plan to increase liquidity as part of its turnaround plan.
The reverse split will also help BBBY stay compliant with the Nasdaq’s policy of a minimum price of $1. Today, BBBY is trading just below $1. If the stock continues to trade under $1 for 30 consecutive days, then the Nasdaq will notify Bed Bath of its noncompliance.
Following receipt of the notification, Bed Bath will then be provided with a 180 calendar-day grace period to reach $1 for at least 10 consecutive days. If BBBY fails to do this during the 180 calendar day period, it could be eligible for another 180 calendar-day grace period.
Shareholders generally perceive reverse splits as a negative signal. “Companies that do reverse stock splits are often in some financial distress, with dim prospects for recovery,” said Titan Global Capital Management. “This may prompt investors to sell and move on.”
Last month, the retailer announced that it would raise $1 billion through preferred stock and warrants in an effort to stave off bankruptcy. Shareholders also reacted to this announcement negatively due to its dilutive nature.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.