NU Online News Service, Dec. 3, 2003, 11:12 a.m. EST – Summit Life Corp., Oklahoma City, Okla., says its board and a majority of its stockholders have approved a 1-for-100 reverse stock split that will lead to the company “going private.”[@@]
The deal affects 2.7 million shares of stock with a total market value of $532,568.40, according to a report Summit Life has filed with the U.S. Securities and Exchange Commission.
Summit Life shares have been selling for a price of about 21 cents per share on the Nasdaq OTC Bulletin Board.
In a 1-for-100 reverse stock split, the issuing company replaces every 100 shares of old, “pre-split” stock with 1 share of new stock.
The plan approved by the Summit Life board calls for the company to pay 50 cents per pre-split share to stockholders who otherwise would receive fractional shares of the new stock.
Because Summit Life will use cash, rather than stock, to compensate investors who would otherwise receive less than 1 whole share, the transaction will reduce the number of stockholders to 308, from 1,397, Summit Life says.
Federal securities laws let companies with fewer than 500 stockholders cancel their registrations and return to operating as private companies.
As a result, after the Summit Life reverse stock split takes place, the company “will no longer be subject to many of the reporting and other requirements under the federal securities laws that are applicable to public companies,” Summit Life says in a shareholder information statement. “In addition, our stock will cease to be traded on the OTC Bulletin Board, and any trading in our common stock after the reverse stock split will occur only in privately negotiated transactions.”
Summit Life Chairman James Smith has sent shareholders a letter telling them that they will have no chance to object to the reverse stock split.
“Our board of directors unanimously supports the reverse stock split,” Smith writes in the letter. “In addition, our controlling stockholders have consented in writing to the amendment to our certificate of incorporation to effect a 1-for-100 reverse stock split. This action by the controlling stockholders is sufficient to ensure that a majority of our stockholders approve the amendment without the vote of any other stockholders. Accordingly, your approval is not required and is not being sought.”
Summit Life originally went public in 2002 by selling stock to the public with a value of $423,700.
Summit Life says it wants to return to private status partly because it is spending too much time and money on servicing stockholders with small positions, and partly because stockholders have been trading an average of only 112 shares of Summit Life stock per day.
“We have not realized many of the benefits associated with being a publicly traded company, such as enhanced stockholder value, access to capital markets and business credibility, due to the limited liquidity and low market price of our common stock,” the company says.
Summit Life adds that the low share price has hurt efforts to attract and retain high-quality employees.