Coinciding with the effective date for a previously announced reverse stock split, the price for shares of leading reverse mortgage lender Finance of America (FOA) stood well above the minimum threshold the New York Stock Exchange (NYSE) requires to maintain trading activity.
As of the close of trading on Friday — the day the reverse stock split went into effect — FOA’s share price jumped from $0.73 at the end of trading on Thursday to $7.19 per share the following morning, roughly corresponding to the 10:1 ratio the company explained would take place on the effective date.
By 4:00pm EST on Friday, the share price had increased 3.43% compared to morning hours to sit at roughly $7.72 per share.
This was the intended impact of the move, according to regulatory filings and company officials who spoke with HousingWire’s Reverse Mortgage Daily (RMD) in the days leading up to the effective date.
“[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 company explained when announcing the effective date of the move last week. “No fractional shares will be issued as a result of the reverse stock split.”
RMD reached out to FOA for comment, and a company representative referred questions to a new 8-K filing with the Securities and Exchange Commission (SEC) posted Friday.
All shares of class A common stock “outstanding immediately following the effectiveness of the reverse stock split remain fully paid and non-assessable,” the filing stated, and and the shares continue to trade on the NYSE under the “FOA” symbol.
The split “had the principal effect of proportionately decreasing the number of outstanding shares of class A common stock at the 10:1 reverse stock split ratio,” the filing added.
The stock market broadly speaking experienced a rally on Friday, according to reporting at CNN, which stems from strong corporate performance and a prevailing perspective that the Federal Reserve could move to cut interest rates by this fall.
“The Dow jumped 624 points, or 1.6%, on Friday after soaring more than 800 points earlier in the session. The S&P 500 gained 1.2% and the Nasdaq Composite added 1%,” CNN reported.
FOA previously explained in a filing with the SEC last month that it has moved to perform the reverse stock split to bring its share price into compliance with the NYSE’s continued listing standard, which states that listed stocks maintain a price of at least $1 per share “over a consecutive 30 trading-day period.”
The company explained that it expected the move to “increase the per-share trading price of our class A common stock back above $1.00,” also saying it believed that it “may make our class A common stock more attractive to a broader range of institutional and other investors,” the company said when announcing the move in June.
In December 2023, the company received a notice from the NYSE that it was out of compliance with the exchange’s continued listing standard. 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 continued to be traded.
Earlier this month, credit rating agency Fitch announced that its long-term issuer default rating (IDR) for FOA had been downgraded following the announcement of a debt exchange plan that staves off maturity risk beyond 2025.
