Synovus shareholders approved a reverse stock split plan that will give stockholders one share for every seven they own, the company said.
Synovus’ stock closed at $3.28 a share Thursday. While the reverse stock split won’t go into effect until May 19, at the current price, it would mean that an owner of seven shares would have one share worth $22.96.
Columbus-based Synovus, the second-largest banking company based in Georgia, announced the plan in its February proxy filing.
Normally, stock splits work the other way and give stockholders more shares but cut the share price. A reverse split is used to boost the share price, and by extension per-share earnings, to levels that make it more attractive to certain investors.
“It’s more optics than anything else,” said Christopher Marinac, director of research at FIG Partners. “It feels better.”
Marinac said that in addition to making Synovus’ earnings per share look higher, the reverse split will make Synovus more appealing to pension funds and other investors that tend not to look twice at stocks priced below $5 a share.
Synovus’ shares traded in the low $30s in 2008. The company was battered by the housing crisis, and last year, paid back nearly $1 billion it borrowed in the bailout program.
Another Georgia company, United Community Banks, consolidated five shares into one in 2011. Marinac said a FIG Partners study showed that in the short term, a reverse split means more liquidity and greater interest in the stock.
In a statement, Synovus chairman and CEO Kessel Stelling said the increase in share price “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.”
Synovus, which reported earnings Tuesday, had $45.9 million in profit available to common shareholders for the first quarter, a 210 percent increase from a year ago.
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