On paper, they are eye-popping numbers.
Shares of Synovus Financial Corp. jumped $18.86 Monday in trading on the New York Stock Exchange. They closed up 604 percent at $21.98 apiece.
But, in reality, the performance of the Columbus-based regional bank’s common stock was simply a “one-for-seven” reverse stock split that its shareholders approved April 24 at the company’s annual meeting of shareholders.
The firm’s board of directors later that day authorized the reverse split, which bundles every seven shares held by investors into one. In essence, someone with 700 shares would now have 100. The bank said Friday that those holding an odd number of shares — such as six and not seven — would not receive “fractional shares.” Instead, they get a cash payment.
Synovus Chairman and Chief Executive Officer Kessel Stelling, as the split was announced, said the move to increase the value of each 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 split also reduces the number of outstanding Synovus shares from the pre-split 2.4 billion to just under 343 million, which could mean future common stock issuances to raise additional capital as the bank looks to strengthen its balance sheet and grow.
At the annual meeting, Stelling noted the bank raised $185 million through a common stock offering last year, and another $130 million with a preferred stock offering.
The company, parent of Columbus Bank and Trust, reported a profit of $45.9 million, or 5 cents per share, in the first quarter of this year.Wall Street responded to the split Monday by pushing Synovus shares slightly higher based on the pre-split price. The bank’s stock opened at $20.34, climbed to $22.40, then settled to a close of $21.98 each.
At last Friday’s closing price of $3.12, seven shares would have been worth $21.84 heading into Monday's split, and 14 cents lower than Monday's close. That equals a gain of 2 cents per share at the pre-split price of $3.12.
Either way, Synovus shares haven’t been in the neighborhood of $22 per share since the bank’s 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 decline as the Great Recession took its toll on the U.S. economy and the banking industry.