Finance of America (FOA), the leading U.S. reverse mortgage lender, has received shareholder approval upon recommendation of its board to perform a reverse stock split at a 10-to-1 ratio in a move designed to boost the company’s stock price. This is according to a company filing with the Securities and Exchange Commission (SEC) reviewed by HousingWire’s Reverse Mortgage Daily (RMD).
A reverse stock split involves consolidating the available shares in the market 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, the filings suggest.
RMD reached out to FOA for comment on the move, but a spokesperson referred any questions back to the SEC filing.
“The Reverse Stock Split is intended to increase the per share stock price of our Class A Common Stock to regain compliance with the continued listing standards of the NYSE,” the filing reads.
The company obtained approval for the move from its stockholders, who represent nearly 70% of the voting power pertaining to outstanding shares of the company’s capital stock. The company also elaborated on the reasoning behind the move in a latter portion of the filing.
“Our Board has determined that it is advisable and in the best interests of the company and our stockholders to reduce the number of shares of Class A Common Stock outstanding with the primary intent of increasing the per share trading price of our Class A Common Stock in order to meet the NYSE’s price criteria for continued listing on that exchange,” the filing reads.
FOA is hopeful the move will make a material difference, according to the filing.
“We expect the Reverse Stock Split to increase the per-share trading price of our Class A Common Stock back above $1.00, and as a result, we also believe that the Reverse Stock Split may make our Class A Common Stock more attractive to a broader range of institutional and other investors, as we have been advised that the current per share trading price of our Class A Common Stock may affect its acceptability to certain institutional investors, professional investors and other members of the investing public,” the company said.
Brokerage houses and institutional investors often have “internal policies and practices that either prohibit them from investing in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers,” FOA noted, adding that some of these policies “may function to make the processing of trades in low-priced stocks economically unattractive to brokers.”
The company is aware of certain risks that come with the move — including the possibility that it does not lead to the desired outcome.
The outcome of the move “cannot be predicted with any certainty,” it stated, nor can the company guarantee improved total market capitalization. There are other factors that could affect how the move ultimately plays out, including business performance and market realities.
FOA first received word from the NYSE that it was out of compliance with its continued listing standard in December 2023, with a second notice issued in February 2024. NYSE requires that listed stocks maintain a price of at least $1 per share “over a consecutive 30 trading-day period,” but the price has reached that threshold only eight times in 2024. At the end of trading on Thursday, the share price stood at $0.61.
Earlier this month, the company instituted a round of layoffs that impacted multiple layers of the organization, but it is unclear how extensive these layoffs were. At the same time, the company’s chief retail sales officer elected to voluntarily leave FOA, according to company president Kristen Sieffert.
According to Home Equity Conversion Mortgage (HECM) endorsement data compiled by Reverse Market Insight (RMI), FOA was the No. 1 lender in the country with 7,784 endorsements in the 12-month period ending on May 31, 2024.
This data does not include originations of proprietary reverse mortgages, but no provider of these loans publicly shares the sales volume figures for their private-label products.