Fannie Warns of Reverse Stock Split
by Tom on December 1, 2008
in Market Musings
Fannie Mae (FNM: 0.90 -22.41%) appears to be headed for a reverse stock split in a bid to keep its shares trading on the New York Stock Exchange. According to a filing with the Securities and Exchange Commission last week, the GSE said it had notified the NYSE that it intends to bring the share price of its common stock and the average share price of its common stock for 30 consecutive trading days above $1.00 by no later than May 11, 2009.
Fannie Warns of Reverse Stock Split : HousingWire || financial news for the mortgage market.
So what? They are making two shares (or three or four?) of stock into one. What’s the big deal?
Let’s just say that the big deal is that they are doing it for a couple of reasons:
- They have no choice – the New York Stock Exchange has a rule that they won’t keep a stock on their exchange that is worth less than a dollar for 30 days in a row.
- Hopefully by combining several shares into one, that can be avoided.
It’s a signal of how bad things are at Fannie and Freddie that several shares of their stock need to be combined in order to get the price over $1.00.
Ouch.
I expect a 5 or 10:1 reverse split. They want their shares marginable which requires a $5 share price. Marginable also make the shares mutual fund eligible subject to prospectus restrictions.
Seems reasonable to me…..