Yesterday was crunch time for Babylon Health, the UK health scaleup that listed in the US last year.
For more than a month, its shares have been selling for less than $1 on the New York Stock Exchange (NYSE).
Over that period, the company was hoping things would pick up — but they didn't. They dropped from $0.85 on August 8 to $0.57 on September 22. The NYSE requires that companies maintain an average closing share price of at least $1 over 30 consecutive trading days.
Yesterday, September 22, that period came to an end, with its market capitalisation sitting at $239m — down from more than $4bn when it first listed.
As a result, Babylon told the exchange that it would implement a reverse share split — a move that will increase its share price — as soon as possible before the end of the year.
Reverse share split
Babylon received shareholder approval of a reverse share split at a consolidation ratio of between 15 and 25 on September 14.
That means Babylon will reduce the overall number of shares by grouping them together. If it decides on a consolidation ratio of 15, a shareholder who currently has 150 shares in Babylon would end up with just 10. Those 10 shares would, however, be worth just as much as the original 150 — and would therefore each trade for a much higher amount.
The company now has to get its board to also approve the move.
Then, once the reverse share split takes place, it will need to keep its fingers crossed that the share price rises above $1 — and stays there for over 30 trading days. This shouldn't be a problem, given the consolidation ratio Babylon has planned.
In the meantime, Babylon shares can continue to be traded on the NYSE.
Implementing a reverse share split was not the only option open to Babylon, as Sifted reported in August.
Delisting is always an option — and one that analysts Sifted spoke to predicted several listed companies would take this year.
By remaining listed, at a much-reduced valuation compared to when it floated, Babylon could be a target of a takeover bid.
“You become quite vulnerable when you’re listed and your share price trades significantly and consistently below fair value,” Citi banker Lars Ingemarsson told Sifted.