So, What’s New
The shares of VEREIT (NYSE: VER) closed Friday at around $37.86 in contrast with the previous close of $7,70. The calculation on that move, though, is meaningless. This price move was widely expected.
Management announced plans to perform a 5-for-1 reverse stock split on Nov. 5, when it announced its third-quarter earnings. The number of shares doesn’t change with stock splits, only the number of shares. After the split, proportional ownership will remain the same among shareholders. Meanwhile, the dividend will now be $0.385 per share, a five-fold increase over what it was before the reverse split.
A company can do reverse splits for many reasons, but its stock price remains above the exchange minimum, so it stays on the exchange. However, that was not the case here. In fact, VEREIT has overcome a similar challenge in recent years and is in solid shape today. Due to strategic reasons, this split was likely undertaken to not fall below a share price of $10. Larger investors tend to steer clear of stocks below that amount.
Is that a worrying Sign?
Some investors may have been surprised by the VEREIT price action today, which is not surprising at all. The reverse split isn’t that common. The move was a little out of left field given VEREIT’s largely complete turnaround so far. VEREIT (NYSE: VER) is still just as it was just one day ago: nothing has changed here.