Following the news of reverse stock split, shares of
Synovus Financial Corp.
) slipped 2.44% to close at $3.20. This is a typical trend that
stocks witness if they take reverse stock split action as
existing investors take it negatively for several reasons.
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SYNOVUS FINL CP (SNV): Free Stock Analysis
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Last week, Synovus got shareholders' consent at its 2014 annual
meeting for 1-for-7 reverse stock split plan of its common stock.
Additionally, Synovus' shareholders approved the proposal to
augment authorized common stock to 2.4 billion shares from 1.2
billion, effective Apr 24, 2014.
According to the nature of the reverse stock split, 7 shares of
issued and outstanding Synovus common stock will be combined into
one share of common stock without any change in the par value per
share. Effective May 16, 2014, the company expects the reverse
stock split to come into effect.
Moreover, trading on a post-split basis on the New York Stock
Exchange (NYSE) is expected at the opening of trade on May 19,
2014. Notably, the share price of Synovus will increase 7 times
the price per share, trading prior to the effective date of the
reverse stock split.
Further, the number of authorized shares of Synovus' common stock
will be reduced to about 342.9 million from 2.4 billion. Synovus'
common stock will continue trading on the NYSE under the symbol
"SNV" but under a new CUSIP number.
No fractional shares will be issued in the reverse stock split.
However, shareholders holding a fractional share of common stock
will be paid cash.
Normally, shares trading at a lower price become less attractive
to certain categories of investors including mutual funds and
other institutional buyers. Therefore, reverse stock split
increasing the share price of Synovus common stock will make it
more attractive for all investors. Further, increased liquidity
of the stock will benefit the existing shareholders.
Recently, Synovus posted encouraging first-quarter 2014 results.
Driven by lower provisions, net income of 5 cents per share in
the reported quarter more than doubled from 2 cents in the
prior-year quarter. Provision for loan losses was $9.5 million,
down 73.4% year over year.
We believe Synovus has emerged from a recovery phase and come a
long way by improving operating efficiencies. Though regulatory
issues and a low interest environment remain concerns, repayment
of Troubled Asset Relief Program (TARP) dues in 2013 depicts
sustainable earnings in the upcoming quarters.
Currently, Synovus carries a Zacks Rank #2 (Buy). Other
better-ranked Southeast banks include
Capital City Bank Group Inc.
First NBC Bank Holding Co.
Farmers Capital Bank Corp.
). All these carry a Zacks Rank #1 (Strong Buy).