Minus Three Equals Plus Three

By Dick Hughes  

JUNE 30, 2011 11:55 a.m. (0)

Palmetto Bancshares is instituting a one for four reverse stock split to quadruple its per share price as “one of the final steps to listing our common stock on the NASDAQ stock exchange,” Samuel L. Erwin, chief executive officer, announced.

The stock split, which was effective one minute before midnight Tuesday, reduces the number of Palmetto’s outstanding shares from 50.9 million to 12.7 million.  It was expected to produce a corresponding increase in the bid price of common stock from $2.60 to $10.40.

To qualify for NASDAQ, Palmetto has to maintain a bid price of at least $4 per share.

Under terms of the sale of $104 million in shares through private placement primarily with three outside investor groups, Palmetto agreed “to use its reasonable best efforts to list its common stock on NASDAQ or other national securities exchange.”

While Palmetto has traded publicly, it has done so primarily through a company trading system that matches bidders with sellers.  It also is listed on the over-the-counter pink sheets and will continue to be listed there until it gains NASDAQ listing.

In a proxy to shareholders urging approval of the reverse split, which shareholders approved, Palmetto said listing on a major national exchange will make Palmetto stock “more attractive to a broader range of institutional and other investors” than the limited and less transparent trading in the pink-sheet OTC.

Large institutional investors shy away from or prohibit brokers from trading in low-priced pink sheet stocks, and brokers don’t like to deal with them because transaction costs are high and commissions low.

The company believes “that the only remaining requirement for the initial listing is to maintain a bid price of at least $4 per share.”

“This is an important and exciting milestone in our company’s 104-year history as we continue our efforts to generate long-term value for our shareholders,” said Erwin.

After skirting losses in the first few months of the recession, Palmetto Bank’s heavy portfolio of commercial and development real estate carried the bank down with losses of $40 million in 2009, $60 million in 2010 and $6 million in the first quarter of this year.

Based in Greenville, Palmetto Bank has assets of $1.3 billion and 29 branches in the Upstate. It claims to be the fourth-largest bank headquartered in South Carolina.