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Bright Health Group will seek shareholder approval for a reverse stock split to raise the value of its stock, the embattled insurance company reported to the Securities and Exchange Commission Monday.
A vote is slated for the company’s annual meeting May 4. A reverse stock split would consolidate Bright Health shares by as much as one-to-80, according to the company. The board of directors would reevaluate executive compensation if the reverse stock split goes through, the company notified the SEC.
Bright Health finds itself in this position because its share are at risk of being delisted by the New York Stock Exchange as soon as June 6 if they don’t reach at least $1 and hold that value for 30 consecutive days. Bright Health’s shares opened at 22¢ on Tuesday, a 98.7% decline from its $17.25 initial public offering in 2021.
The insurtech must must raise approximately $300 million to stay solvent, executives told investors last month. As an indicator of Bright Health’s troubled finances, at least two states have placed its subsidiaries under supervision and restricted the company’s ability to spend money amid concerns it lacks the funds to meet its obligations. Bright Health had a $12.9 million shortfall across its state-regulated entities at the end of 2022, according to a previous SEC filing submitted this month.
By increasing the number of shares available to trade, Bright Health seeks to avoid delisting and make its stock more appealing to investors. Many institutional firms are prohibited from investing in or recommending low-priced stocks to their clients, and they charge fees to those who trade these companies’ shares, Bright Health wrote in the filing.
If the shareholders approve the reverse stock split, investors who would have been entitled to fractional shares of stock would instead receive cash payments based on proceeds from sales.
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