Sirius XM Files To Allow Share Dilution, Stock Split
October 17, 2008 at 5:25 AM (PT)
SIRIUS XM RADIO filed a preliminary proxy statement THURSDAY with the SEC, with two suprises included on the front page.
- To approve an amendment to our certificate of incorporation to increase the number of authorized shares of our common stock from 4,500,000,000 to 8,000,000,000 shares.
- To approve an amendment to our certificate of incorporation to (i) effect a reverse stock split of our common stock by a ratio of not less than one-for-10 and not more than one-for-50 at any time prior to December 31st, 2009, with the exact ratio to be set at a whole number within this range to be determined by our board of directors in its discretion, and (ii) reduce the number of authorized shares of our common stock as set forth in the proxy statement.
What does this mean?
SEEKINGALPHA.COM writes it is a proposal to allow for an increase in authorized shares from 4,500,000,000 to 8,000,000,000. It would allow for a substantial amount of dilution. To be clear, this does not mean that any shares will be issued. It simply means that the company would be authorized to issue shares if they deem it in the best interest of the shareholders.
The second issue is the potential for a reverse split. The company is asking that shareholders approve the ability to conduct a reverse split in a range between 1 for 10 and 1 for 50. In simple terms, a 1 for 10 reverse split means that if you have 10 shares of stock, currently priced at .39 cents each, you would now have 1 share priced at $3.90. In a 1 for 50 reverse split, 50 shares, 50 shares priced at .39 cents each would become one share priced at $19.50.