There were plenty of points made Thursday about 2013 being a “year of progress” for Synovus Financial Corp., with the regional bankholding firm’s investors and employees gathered for its annual meeting of shareholders.
After all, said Synovus Chairman and Chief Executive Officer Kessel Stelling, “Some would call it the most pivotal year in our company’s history.”
But the major news from Thursday’s event at the Columbus Convention and Trade Center was the authorization via a shareholder vote to allow a one-for-seven reverse stock split of Synovus common shares. The board of directors also was given the OK to increase the number of authorized shares of common stock from 1.2 billion to 2.4 billion.
Synovus general counsel Allan Kamensky announced both had passed with approval votes of just under 90 percent. An affirmative vote of only two-thirds was needed to allow the moves.
The company didn’t waste any time in declaring the stock split. About an hour after the New York Stock Exchange’s 4 p.m. close, the company said its board of directors had approved the one-for-seven stock split that will take place May 16. They will begin trading on a “post-split basis” on May 19.
The firm, headquartered in Columbus and parent company of Columbus Bank and Trust, said when the reverse stock split takes effect, its existing 2.4 billion shares will be reduced to just under 343 million.
In essence, instead of holding seven shares of Synovus stock at Thursday’s closing price of $3.28 — if the split had taken effect Thursday — investors would own one share of stock valued at $22.96.
The prime reasoning — other than the bank’s stock looking much healthier than it has in years — is to push it above $5 per share to entice some investors, such as mutual funds, who otherwise would not or could not consider purchasing Synovus stock.
“There are some (mutual funds and institutional investors) that have said they can’t invest under $5, and you want everyone to be able to invest in your company. To exclude any class of investor, we thought, was not the right thing,” Stelling said after the annual meeting.The CEO noted the split itself will not generate any capital for the company or investors.
“It just resets the price,” he said. “And as far as the increase in authorized shares, that’s just good corporate governance and good planning. We want shares available if the company should need them. There are no plans to issue any additional shares at this point.”
As part of his annual meeting presentation, Stelling noted the bank raised $185 million through a common stock offering last year, and another $130 million with a preferred stock offering.
Synovus shares haven’t been anywhere in the neighborhood of $23 per share since its spinoff of then-subsidiary TSYS, a Columbus-based credit-card processor, into a stand-alone company at the end of 2007.
On Dec. 31 of that year, prior to the midnight split with TSYS, Synovus shares closed at $24.08 each. On Jan. 2, 2008, minus the subsidiary on its books, shares ended the day at $10,80. They edged higher after that, but eventually began a steady tumble as the Great Recession took a somber grip on the U.S. economy.
In a release after announcing the board of directors had pulled the trigger on the reverse stock split, Stelling said the “anticipated increase in the market price per share will help make our common stock more attractive to a broader range of investors, which we in turn believe will benefit our existing stockholders by enhancing the liquidity of our common stock.”
The bottom line: The time leading up to the split, along with the actual higher stock price generated by converting seven shares into one in mid-May, should generate more excitement for Synovus as an investment and its overall outlook.
Still, Stelling said after the annual meeting, everybody gets the mathematics equation. The impact could be more of an emotional one, especially for a company that suffered through three years of financial losses before positioning itself to repay $968 million to the federal Troubled Asset Relief Program (TARP) last July.
“It’s a sign, I hope, of a stronger company. And from a morale standpoint, it has the look and feel of a stronger company,” the CEO said. “But the economics don’t change. You have what you had the day before the split.”
Synovus oversees about $26 billion in assets through its 28 individually branded banks in Georgia, Alabama, Florida, South Carolina and Tennessee.