National CineMedia Plans Reverse Stock Split To Keep Sinking Shares Afloat, Avoid Nasdaq Delisting

In-theater advertising firm National CineMedia announced a special shareholders meeting to vote on a reverse stock split — a move that boosts the price of a company’s shares — as it risks being delisted by the Nasdaq market and works through a voluntary Chapter 11 reorganization.

The company, which was founded and is largely owned by the nation’s largest exhibitors, announced its plans in an SEC filing that, however, didn’t include the date for the 2023 meeting yet, or the terms of the reverse split. Those details will come, with “the exact ratio to be determined by the Board of the Company at its discretion,” the filing said. 

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The shares, which have been in penny stock territory for many months, fell more than 10% today to close at 31 cents. They rose (3%) to 32 cents in late trading.

AMC Entertainment, which had also seen volatile trading, announced plans for a ten-for-one reverse stock split late last year. Reverse splits boost the price of a stock and reduce the total number of shares outstanding. They are typically done by companies looking to avoid delisting or improve their standing with investors. A number of shares, in this case still unspecified, are combined and reclassified into one share.

Stock splits, the opposite maneuver, are common, recent examples include Apple and Amazon, and generally a sign of progress as the stock price get too high.

National CineMedia was put on notice by Nasdaq last October that it had failed to meet minimum listing requirements (by staying below $1 share for 30 consecutive days) and was most recently given until July 26 to get into compliance.

The company was also involved in the ongoing bankrutpcy of Cineworld, the paret of NCMI part-owner, Regal, which wanted to exit or change the parties’ long-term contract as part of its own Chapter 11. NCMI sued but the case was shut down by Regal’s bankrutpcy court judge. The companies reached a new, comprehensive agreement earlier this month. It will be part of Cineworld’s eventual restructuring plan when that’s appproved by the judge, likely this summer.

NCMI’s filing today said “Regal has agreed to timely vote its shares of capital stock in the Company in favor of the Reverse Stock Split.”

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