Pacific Capital Bancorp has until April 6, 2011, to get its stock price to a minimum of $1 per share or it could be delisted from the Nasdaq Global Select Market. The company hasn’t closed a day of trading above $1 since Aug. 25, with a price of about $1.61 per share.
The company—which operates several Central Coast banks, including First Bank of San Luis Obispo—was notified by Nasdaq on Oct. 8 that it had been trading below the acceptable amount for 30 consecutive days, according to a filing with the U.S. Securities and Exchange Commission. Under Nasdaq rules, Pacific Bancorp has 180 days to get its stock back up to the minimum amount for 10 consecutive days, said the company’s Executive Vice President and Public Affairs Director Debbie Whiteley. Otherwise, Nasdaq “will provide written notification to the Company that the Common Stock is subject to delisting from the NASDAQ Global Select Market,” the company’s SEC filing states.
In order to pump up its stock price, the company plans to perform a “reverse stock split.” According to the SEC website, “a reverse stock split reduces the number of shares and increases the share price proportionately.”
In other words, the company will shrink its number of shares and make each individual share more valuable, but each shareholder will hold the same dollar value of stock.
According to the SEC filing, “There can be no assurance, however, that a reverse stock split will be completed in the near future or at all, or that a reverse stock split, if completed, would result in the closing bid price of the Common Stock exceeding the Minimum Bid Price Requirement.”
Whiteley said neither she, nor others in the company, are particularly worried: “This is not an uncommon thing to occur.”
Peter Rupert, an economics professor with the University of California, Santa Barbara, said of stock splits, “One other reason is to reduce the amount of shareholders, called ‘cashing-out.’ If you own fewer than some number of shares, they can just cash you out. Overall, it is usually a sign that a firm is in financial trouble.”
Pacific Capital Bancorp reported a loss of $61 million ($1.30 per share) in the second quarter of 2010, according to an Aug. 9 SEC filing.