In an April 28 Securities and Exchange Commission filing, the Boca Raton, Fla., chain had said the increased price resulting from the split would “improve the marketability and liquidity of our common stock and will encourage interest and trading in” it.
“A reverse stock split could allow a broader range of institutions to invest in our common stock, including investors that, as a matter of policy, avoid or are prohibited from buying stocks that are priced below a certain threshold, potentially increasing the liquidity of our common stock.”
In addition, “ a reverse stock split could help increase interest in our stock from analysts and brokers, as their policies can discourage them from following or recommending companies with low stock prices,” Office Depot said.
Furthermore, “a higher stock price could help us attract and retain employees and other service providers,” the company said.
One potential factor the company didn’t mention: A company’s failure to meet a minimum closing bid price of at least $1 for 30 consecutive trading days can trigger delisting on the Nasdaq, where Office Depot trades.
A reverse stock split doesn’t affect a company’s market capitalization. The 1-for-10 reverse split will reduce the number of shares outstanding while increasing the price, both by a factor of 10.
Office Depot shares at last check stood at $2.34, down 1.5%. The stock has dropped 73% over the past five years.
Office Depot has suffered in recent years from the rise of discount retailers and online competition.