Agere Proposes Reverse Stock Split
Agere Systems (NYSE: AGR/A) will seek shareholder approval for a reverse stock split, according to a preliminary shareholder proxy filed with the Securities and Exchange Commission (SEC) yesterday.
The matter goes to a shareholder vote on Feb. 20 in New Jersey, when Agere will ask permission to initiate a split of 1-for-5, 1-for-10, or 1-for-15 shares. The reverse split would apply to Agere's Class A and Class B shares. Both were trading around $1.40 late today.
A reverse split might be necessary to keep Agere listed on the New York Stock Exchange. Rules state a company can be delisted if its average share price remains less than $1 for more than 30 days, a situation that already happened to Agere in October. The NYSE gave Agere a formal warning at that point (see Agere Stock Warned).
Aside from the stigma attached, delisting could affect Agere's cash reserves. A statement in the company's recent 10-K report reads, "Having our common stock delisted would likely result in our having to offer to repurchase $410 million of convertible debt that otherwise would not be due until 2009." Reverse splits are becoming all the rage in telecom, with proposals afloat from Nortel Networks Corp. (NYSE/Toronto: NT) and former Agere parent Lucent Technologies Inc. (NYSE: LU) (see Nortel Outlook Worsens and Lucent Proposes Reverse Stock Split). "It's gotten so bad that Nasdaq has considered lifting the requirement of [having a share price] over $1," said one analyst who requested anonymity.
Lucent and Nortel shareholders will vote on their companies' proposed reverse splits in February and April, respectively.
For Agere, the reverse split would be the latest chapter in a rocky saga since going public in March 2001. Aiming for an IPO share price of $15 to $20, the company had to settle for $6 (see Agere Sets Pricing Date and Range and Agere's Fistful of Dollars). Its stock climbed to $9.50 by mid-2001 but sank as low as 50 cents recently.
For the fiscal year ended September 2002, the company reported losses of $1.1 billion on revenues of $2.2 billion, compared with losses of $3.5 billion on revenues of $4.1 billion for fiscal 2001.
— Craig Matsumoto, Senior Editor, Light Reading