Excite@Home Corp.'s board of directors has approved a plan for a reverse
split of the company's shares -- a move that could reduce the number of
outstanding shares of company stock by as much as 75 percent and help to lift
its sagging stock price.
In its annual proxy statement, issued late Monday, Excite@Home said the board
has approved a reverse split at an exchange ratio of either one-to-two,
one-to-three or one-to-four. Which option the company takes, or if it takes any
action at all, will be at the board's discretion.
If the one-to-four option was chosen, Excite@Home's outstanding shares would
be reduced from its current 408.4 million to 102.1 million. The company still
would need shareholder approval for such a reverse split to take effect.
Excite@Home said the reason for the reverse split is to keep the stock from
sliding below the $1-per-share mark, which could result in its delisting from
the National Association of Securities Dealers Automated Quotation system.
According to NASDAQ rules, a stock can be delisted if it trades under $1 each
for 30 consecutive days. Although Excite@Home has been trading above $1 per
share -- it closed at $2.22 Monday -- the company appears to be fearful enough
of a continued slide to have a contingency plan in place.
'Among the reasons for implementing a reverse stock split are to minimize the
potential risks to Excite@Home and its stockholders that could result from our
series-A common stock being delisted from the NASDAQ National Market,' the
company said in the filing. 'Delisting from the NASDAQ National Market would
likely significantly decrease the liquidity of our series-A common stock, which
could reduce the trading price and increase the transaction costs of trading
shares of our series-A common stock.'
Delisting also could jeopardize the company's recent deal for $100 million in
convertible bond financing from Promethean Capital Group.
According to the filing, Excite@Home said that if its stock were to fall
below the NASDAQ threshold, 'We would no longer be able to elect to issue shares
of our series-A common stock to satisfy our redemption obligations under the
convertible notes, and would instead be required to pay cash.'
The company said that according to its agreement with Promethean, if its
stock were to be delisted, the note holders would have the right to redeem those
notes for cash immediately.
Excite@Home has been strapped for cash, and in April, it said it would need
between $75 million and $80 million to fund operations for the rest of the year.
The Promethean deal was expected to give the company breathing room as it looks
to right its operations.
Shareholders are expected to vote on the matter at Excite@Home's annual
meeting July 24 at company headquarters in Redwood City,
Calif.
