The last time that shares of Bed Bath & Beyond (NASDAQ:BBBY) closed above $1 was March 17. Since BBBY stock is listed on the Nasdaq, this is a problem. The exchange stipulates that a company will receive a deficiency notice if its stock trades under $1 for 30 consecutive business days. The deficiency notice will provide the company with a 180-day compliance period to trade at $1 or higher for 10 consecutive business days. If a stock is unable to trade above $1 for 10 straight days during the compliance period, the company may be eligible for another 180-day extension as long as it “meets the market value of publicly held shares requirement for continued listing.”
Bed Bath’s management has clearly taken note of its less than $1 stock price, as the company announced a special meeting of stockholders set for May 9. During the meeting, the shareholder votes for a reverse stock split proposal will be revealed in a ratio between 1-for-10 and 1-for-20.
BBBY Stock: Bed Bath to Hold Special Meeting on May 9
Shareholders will also be able to vote on adjourning the meeting if the reverse split proposal does not receive enough votes to be approved. Bed Bath’s board has urged shareholders to vote in favor of both proposals. In addition, the board has set March 27 as the record date for the meeting. This means that only shareholders, as of March 27, will be eligible to cast votes for the proposals. March 27 has already passed, which means that anyone buying shares today cannot cast votes.
The reverse split is extremely important for the future of Bed Bath. The company warned, “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. A reverse split would consolidate or lessen the number of shares and allow more shares to be issued. The company added that a higher stock price due to a reverse split would also attract greater investor interest.
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.
