Rite Aid asks stockholders to back reverse common stock split

CAMP HILL, Pa. Rite Aid on Monday reported that all three of the leading independent proxy advisory firms have recommended stockholders support its board of directors’ plan for a reverse split of Rite Aid common stock. All three firms have also recommended a vote for the company’s plan to reduce the number of authorized shares of Rite Aid common stock.

In an Oct. 28, report, Proxy Governance noted, “[Rite Aid] is seeking to boost its share price to a level that will ensure continued listing status and possibly attract broader institutional investment. If achieved, this may benefit all shareholders with higher long-term returns and a more stable stock price.”  

A Glass Lewis report issued the same day echoed support for the reverse stock split. “We agree with the board that it is in the best interest of the company to reduce the number of shares of common stock and thereby proportionally raise the per share price of the company’s common stock.”

And a Nov. 12 report issued by RiskMetrics stated, “The reverse stock split is necessary to avoid delisting of the company's stock on the NYSE. In addition, if shareholders approve this proposal (the reverse stock split) and approve the second proposal, the company will reduce authorized shares by 67 percent.”

On Oct. 17, Rite Aid announced plans for a reverse stock split to ensure that Rite Aid regains compliance with the New York Stock Exchange’s share price listing rule. Stockholders are scheduled to vote on the reverse stock split at a special stockholders meeting on Dec. 2.

Once stockholders approve the split, Rite Aid’s Board will select a reverse stock split ratio of either 1-for-10, 1-for 15 or 1-for-20 so that, depending on the ratio chosen, either 10, 15 or 20 shares of issued and outstanding common stock will convert into one share of common stock The price of each common share would increase by the same ratio when the stock split takes effect.