Capital Senior Living (NYSE: CSU) is taking action to boost its stock price months after disclosing it was in danger of being delisted on the New York Stock Exchange. The move is the latest for the company, which has been in the midst of an ongoing turnaround effort that involves operational changes and a restructuring of its portfolio.
The Dallas-based provider announced Wednesday its board of directors approved a reverse stock split of the company’s common stock at a ratio of 1-for-15. The reverse split is meant to boost the company’s share value, and in the process regain compliance with the minimum share price listing rule of the New York Stock Exchange (NYSE).
“Although the company’s stock has recently traded above the NYSE minimum requirement of $1.00 per share, its board of directors voted unanimously to implement the reverse stock split to mitigate the possibility of non-compliance with the NYSE minimum share price listing rule,” an announcement about the stock split read.
In fact, December brought improvement to Capital Senior Living’s share price, which peaked at $1.30 on Dec. 4. Recently, the company completed a community sale and announced progress on its plan to hand 18 properties over to Fannie Mae. The senior living sector has also benefited from positive news related to the Covid-19 vaccine.
The company’s shareholders on Dec. 9 approved the reverse stock split of the company’s common stock at a split ratio of 1-for-10, 1-for-15, or 1-for-20, leaving the decision to the board of directors.
Capital Senior expects the split to take effect after the financial markets close on Dec. 11, and the CSU common stock will begin trading on a split-adjusted basis on the NYSE when the markets open on Dec. 14.
Once effective, the move will convert every 15 issued and outstanding shares of the company’s common stock into one consolidated share, reducing the number of shares of common stock from about 31.2 million shares to nearly 2.1 million. Capital Senior also is reducing its authorized number of shares of common stock from 65 million shares to 4.3 million shares.
The announcement came just one day after the company had transferred to debt-holder Fannie Mae one of its independent living communities in Deer Park, Texas — the first of 18 properties to be handed back to the lender in a move to improve its balance sheet. When that process is complete, leaders at Capital Senior Living expect the move will reduce the company’s debt by $217.7 million and will improve annual cash flow by approximately $10 million.
The operator has dubbed its ongoing strategy to improve its finances and operating performance SING, which stands for stabilize, invest, nurture, grow. Part of that strategy involves divesting itself of senior living communities or terminating lease agreements. When all those asset transactions are complete, Capital expects to be left with a leaner portfolio consisting of 68 senior living properties primarily geared toward the middle market.