Volition parent THQ seeks reverse stock split to shore up price
CHAMPAIGN — THQ Inc., the parent company of Champaign-based Volition, is considering a reverse stock split to help preserve the company's stock trading price.
THQ's stock price dropped below $1 late last year. On Jan. 25 of this year, the video-game company was notified its common stock could be delisted from the Nasdaq Global Select Market if the stock price didn't rise above $1 for 10 consecutive days before July 23.
On Tuesday, the stock was trading in the 75-cent range.
THQ says being delisted "would be undesirable for our stockholders and potentially detrimental to our business."
So the Agoura Hills, Calif.-based company has scheduled a special shareholders meeting June 29 to authorize a reverse stock split.
A reverse stock split would reduce the number of issued and outstanding common shares — and consequently increase the share price.
In the case of a 1-for-3 split, every three common shares would become one common share. Three shares trading at $1 a share immediately before the split would become one share trading at $3.
If approved, the reverse stock split would take effect about July 5. Shareholders are being asked to authorize 1-for-3, 1-for-5 and 1-for-10 splits, giving the board of directors latitude to proceed with one of those.
In a recent regulatory filing with the Securities and Exchange Commission, THQ said the reverse stock split would help "broaden the pool of potential investors and broker interest in our stock."
It could also help facilitate future financings, the company said.
Among the potential disadvantages:
— It might not increase the stock price over the long term.
— It might lead to a decrease in overall market capitalization.
— It could decrease the liquidity of THQ's common stock.
THQ currently has about 68.5 million shares of outstanding common stock. Depending on which split the board chooses, the number of shares would be reduced to 22.8 million, 13.7 million or 6.8 million.
THQ has weathered several tough years, posting a net loss of nearly $240 million during the most recent fiscal year, which ended March 31.
Volition is one of THQ's most successful video-game studios, having developed the popular "Saints Row" franchise.
On May 25, THQ's board appointed Jason Rubin president at an initial base salary of $300,000, with potential for a bonus that could equal 80 percent of the base salary. Brian J. Farrell remains THQ's chief executive officer.
Rubin, 42, has 20 years of experience in the video-game business. In 1985, Rubin co-founded game developer Naughty Dog, which was acquired by Sony Computer Entertainment America in 2001. From 2009 until this year, Rubin was CEO of Monkey Gods, a game developer he founded.