Eagle Bulk Shipping will conduct a reverse split of its common stock on Tuesday, to boost its share price and make itself more attractive to certain investors.
The Nasdaq-listed supramax and ultramax bulker owner will consolidate every seven of its issued and outstanding common shares into one when markets open in New York.
This will reduce the number of outstanding shares of its common stock from 77.1m shares to around 11m.
Behind the split
The plan was approved by shareholders at the annual general meeting in June.
Eagle Bulk's share price fell by 3% immediately after news of the split was announced on Tuesday morning in New York and has since fallen further.
The stock opened at $2.66 per share but was trading at $2.54 at 12.30pm in New York.
At the June meeting, 85% of shareholders voted to approve the plan to consolidate Eagle Bulk's shares in a ratio of between 1-for-5 and 1-for-20, according to regulatory filings.
Before votes were cast, Eagle Bulk said its primary purpose for wanting to implement such a split would be to increase the trading price of its common stock and decrease the number of its outstanding shares, according to a notice to investors.
Improved marketability and liquidity
It said its board of directors "believes [this] would help improve the marketability and liquidity of the company’s common stock by attracting new investors who are reluctant to invest in shares with low prices".
It would also attract "investment from certain institutional investors and investment funds who are presently prevented under their guidelines from investing in our common stock at its current price levels", Eagle Bulk said.
Chief executive Gary Vogel echoed this reasoning in a statement to TradeWinds on Monday.
"We believe the resultant share price will improve appeal to investors and enable more funds to invest in our stock, some of which have limitations on price entry point," he said.
