On May 9, the shareholder vote on a Bed Bath & Beyond (NASDAQ:BBBY) reverse stock split proposal in a ratio between 1-for-10 and 1-for-20 will be revealed. In the meantime, the struggling retailer has urged shareholders to vote in favor of the proposal. Now, a major proxy voting and corporate governance advisory firm is advising shareholders to do the same.
Recently, Institutional Shareholder Services (ISS) recommended BBBY stock shareholders vote in favor of the reverse split proposal. ISS noted that non-approval could trigger “specific and severe” risks. ISS also added that the share consolidation could allow Bed Bath to raise sufficient capital in order to run operations. According to the firm, Bed Bath has “not demonstrated imprudent use of its authorized shares in the past three years.”
Here’s what else investors should know.
ISS Urges Shareholders to Vote in Favor of BBBY Stock Reverse Split
The message from ISS echoes an earlier message issued by CEO Sue Gove:
“A failure to obtain shareholder approval for the Reverse Split Proposal will likely force us to file for bankruptcy as we will have insufficient Common Stock to enable us to raise additional equity financing.”
Bed Bath recently announced a $300 million common stock offering. As of April 3, there were a total of 260.32 million remaining authorized shares that are eligible to be issued. Based on yesterday’s close of 30 cents, Bed Bath would need to have 1 billion remaining authorized shares in order to complete the offering in full. To solve this, Bed Bath has decided to propose a reverse split in order to consolidate the number of shares.
Shareholders of record as of March 27 will be eligible to cast a vote for the reverse split proposal. This means that any BBBY shares bought after March 27 will not be eligible to cast a vote.
The reverse split could also help buoy BBBY stock back above the $1 threshold. The last time shares closed above $1 was March 17. The Nasdaq stipulates that a company will receive a deficiency notice if its shares close below $1 for 30 consecutive business days.
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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.
