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Rite Aid Reverse Stock Split FAQ
What is a reverse stock split?
Rite Aid stockholders approved a reverse split of Rite Aid common stock at a special stockholders meeting December 2. A reverse stock split reduces the total number of a company's issued and outstanding common shares. As a result of the reduction in the number of common shares, the price per common share increases upon completion of a reverse stock split.
For example:
- If Rite Aid completes a 1-for-10 reverse stock split, every 10 common shares would become one common share, and 10 shares trading at $1.00 per share immediately before the split takes effect would become one share at $10.00;
- If Rite Aid completes a 1-for-15 reverse stock split, every 15 common shares would become one common share, and 15 shares trading at $1.00 per share immediately before the split takes effect would become one share at $15.00; or
- If Rite Aid completes a 1-for-20 reverse stock split, then 20 common shares would become one common share, and 20 shares trading at $1.00 per share immediately before the split takes effect would become one share at $20.00.
With a reverse stock split, a stockholder has fewer but higher priced shares, keeping the total investment the same when the market opens on the date the reverse stock split becomes effective.
Rite Aid's Board of Directors has delayed effecting the company's reverse stock split following the New York Stock Exchange's (NYSE) recent temporary suspension of its minimum share price listing rule until June 30, 2009. The suspension provides Rite Aid with additional time and flexibility to effect the split. The Board will determine the exchange ratio and timing of the reverse stock split, if implemented, prior or immediately following the end of the suspension period based on market conditions, the company's share price and NYSE rules at such time.
Rite Aid common stock continues to be listed on the NYSE and will continue trading as usual. Rite Aid is in compliance with all other NYSE listing rules.
Why did Rite Aid ask stockholders to vote on a reverse stock split?
The objective of the reverse stock split is to ensure that Rite Aid maintains its listing on the New York Stock Exchange (NYSE), which is in the best interest of its stockholders. Rite Aid was notified on October 16, 2008 that it was no longer in compliance with the Exchange's share price listing rule because its average closing price per share had fallen below $1.00 per share for 30 consecutive trading days. On February 26, 2009, the NYSE announced that it is suspending application of the share price rule until June 30, 2009, which extends Rite Aid's cure period to regain compliance. Per the rules of the recent suspension, Rite Aid can now regain compliance by achieving the required $1.00 closing share price and $1.00 average closing share price over the preceding 30 consecutive days on any of the following dates: June 30, 2009; and August 17, 2009. Before the temporary suspension of the share price rule, Rite Aid's cure period was to end on April 16, 2009.
When is the reverse stock split going into effect?
The Board will determine the exchange ratio and timing of the reverse stock split, if implemented, prior to or immediately following the end of the suspension period based on market conditions, the company's share price and NYSE rules at such time. The Board will base the decision upon its evaluation of when such action would be most advantageous to the company and its stockholders. A press release will be issued when that determination is made.
What happens to my stock in the meantime?
Rite Aid common stock continues to be listed on the NYSE and will continue trading as usual. Rite Aid is in compliance with all other NYSE listing rules.
What do I do with the shares I own now when there's a reverse stock split?
- If your Rite Aid shares of common stock are held in a brokerage account, your broker is authorized to exchange the shares for you and the number of shares you own after the split should be reflected in your account. You can contact your broker for more information.
- If you hold the stock certificates yourself, you will receive a letter from American Stock Transfer and Trust Company, Rite Aid's transfer agent, outlining how you must send your certificates back to American Stock Transfer and Trust to exchange them for new certificates. You should receive the information in the mail in about a week after the reverse stock split takes effect. You can contact American Stock Transfer and Trust for more information by calling 877-248-6417 (a toll-free number) or 718-921-8317.
- If American Stock Transfer and Trust Company holds your shares, you will receive a letter of transmittal that you must sign and return for American Stock Transfer and Trust to exchange your shares. You should receive the letter in the mail in about a week after the reverse stock split takes effect. You can contact American Stock Transfer and Trust for more information by calling 877-248-6417 ( a toll-free number) or 718-921-8317.
