PremierWest proposes reverse stock split

PremierWest Bancorp is proposing a reverse split of its stock shares in order to remain eligible for listing on the Nasdaq stock market.

In a proxy statement filed with the Securities and Exchange Commission, Medford-based PremierWest said it will ask shareholders at a special meeting in December to approve one of three options for a reverse split of its shares. That would put the stock price above the minimum level required to maintain a listing on Nasdaq, but would not affect shareholders' value.

According to the filing, PremierWest could reduce its number of common stock shares by an exchange ratio of one for five, one for 10 or one for 15. The company's board also could decide not to take any action.

In a reverse stock split, a company reduces the number of outstanding shares to increase the value of each. If the number of shares were reduced by a ratio of one for five, for instance, the value of each share would be increased five-fold, so the total value would remain the same.

"The board's primary objective in proposing the reverse stock split is to raise the per-share trading price of the company's common stock sufficiently above the $1 minimum bid price requirement for continued listing on The Nasdaq Capital Market," PremierWest said in its filing.

Nasdaq notified PremierWest on March 15 that it was out of compliance after shares slipped below $1. It was given until Sept. 13 to boost its stock price above the $1 figure for 10 consecutive business days and then was granted an additional 180-day period to comply, ending March 11, 2011.

"We believe that a delisting from Nasdaq could have a negative impact on the value and liquidity of our common stock and ability to access the capital markets in the future," PremierWest told its shareholders. "The board determined that continued listing on The Nasdaq Capital Market is beneficial to the company and its shareholders."

The ceiling of 150 million shares of common stock would remain, the filing said.

"As a result, there can be no assurance that the market price of our common stock will increase following the reverse stock split that the market price of the common stock will not decrease in the future or that we will be able to meet and continue to meet Nasdaq's continued listing requirements," the company said in the filing.

If shareholders approve the request, PremierWest said its board will choose an exchange ratio considering: historical trading prices and volume of stock; the stock's prevailing trading price and volume; the number of outstanding shares; the reverse stock split's anticipated impact on the market; and prevailing general market and economic conditions.

"Our preference is that our stock get over a dollar based on financial position," said Jim Ford, president and chief executive officer. "But our board realizes we're dealing with a deadline. This mechanism was available a year ago, but we wanted to see how things played out."

A reverse split would have no impact on the bank's capital levels, which have been under close scrutiny by federal and state bank regulators.

After the reverse split, "people will have less shares with exactly the same ownership (stake) as before," Ford said.

Once given the authority, the bank's board could invoke the reverse split any time during the next year, but it would happen by March 10, Ford said. "We want our board to have maximum flexibility."

Such a move doesn't necessarily guarantee long-term success for a stock, said Ken Thomas, a bank consultant and economist based in Miami.

"Obviously, you try to do everything you can (to bolster a stock)," Thomas said. "Unfortunately, for some banks and companies, the only way you can increase (stock) prices is through a reverse split. Again, though, it's the sign of the times. Financial stocks get hit every day with new regulations and requirements. Bank stocks had it good through the summer of '07 and it's been bad times since then."

PremierWest stock fell 8.8 percent to 39 cents Monday with 1.32 million shares exchanging hands. That's more than triple the 50-day average volume of 391,033 shares.

No specific date has been set for the December meeting.

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