Finance of America, the reverse mortgage industry’s leading lender, announced this week that its planned reverse stock split will take place as scheduled on July 25.
The plan, initially announced last month, involves consolidating the available shares in the company into fewer, higher-priced shares. Faced with the prospect of being delisted from the New York Stock Exchange (NYSE) due to noncompliance with the exchange’s listing standard, the company sees this move as necessary to shore up its price, according to the original 8-K filing with the Securities and Exchange Commission (SEC).
“[E]very ten issued and outstanding shares of the company’s class A common stock will be automatically reclassified into one issued and outstanding share of the company’s class A common stock,” the new announcement explained. “No fractional shares will be issued as a result of the reverse stock split.”
Instead of issuing fractional shares, FOA’s exchange agent Continental Stock Transfer & Trust Co. “will aggregate and sell any such fractional shares and the cash proceeds of such sale will be issued to stockholders in lieu of fractional shares on a pro rata basis.”
The company obtained approval for the move from its stockholders. They represent nearly 70% of the voting power pertaining to outstanding shares of the company’s capital stock, according to June’s announcement of the plan.
“The reverse stock split is primarily intended to increase the per share trading price of Finance of America’s class A common stock in order to meet the NYSE’s price criteria for continued listing,” FOA reiterated in the announcement of the effective date.
FOA has been actively making moves to shore up its financial position. In December 2023, the company received a notice from the NYSE that it was out of compliance with the exchange’s continued listing standard, which requires the share price to remain above $1 in a given 30-day trading period. FOA said it returned to compliance after this point, but NYSE issued a second notice in February 2024.
Earlier this month, NYSE took steps to begin delisting FOA’s warrants, traded under the ticker symbol “FOA.WS,” although the class A common shares traded under the “FOA” ticker symbol will continue to be traded.
Last week, credit rating agency Fitch announced that its long-term issuer default rating (IDR) for FOA had been downgraded from “CCC+” to “C” following the announcement of a debt exchange plan that staves off maturity risk beyond 2025.
FOA announced late last month that it has entered into an exchange offer agreement with certain noteholders that will result in new, secured debt that will come due beyond the original 2025 maturity date of the existing unsecured notes, according to an announcement and an 8-K filing. But Fitch said that it believes other considerations were in play.
Credit rating agency Moody’s also assessed FOA following the debt agreement and determined that its existing rating would remain unchanged.
