Bright Health Group will seek shareholder approval for a reverse stock split to boost the value of its stock, the beleaguered insurer reported Monday to the Securities and Exchange Commission.
A vote is scheduled for the company’s annual meeting on May 4. A reverse stock split would dilute Bright Health shares one to 80, according to the company. the board of directors will reevaluate executive compensation If a reverse stock split occurs, the company notifies the SEC.
Bright Health finds itself in this position because its shares are at risk of being delisted by the New York Stock Exchange by June 6 if they don’t reach at least $1 and maintain that value for 30 consecutive days. Shares of Bright Health opened at 22¢ on Tuesday, down 98.7% from its 2021 initial public offering of $17.25.
InsureTech must should raise around $300 million to remain solvent, executives told investors last month. As an indicator of Bright Health’s troubled finances, at least two states have put its subsidiaries under surveillance and restricted the company’s ability to spend money amid concerns of a lack of funds to meet its obligations. A in Bright Health $12.9 million shortfall into its state-regulated entities by the end of 2022, according to a previous SEC filing submitted this month.
By increasing the number of shares available for trading, Bright Health wants to avoid delisting and make its stock more attractive to investors. Bright Health wrote in the filing that many institutional firms are prohibited from investing in or recommending underpriced stocks to their clients, and they charge fees to those who trade shares of these companies.
If shareholders approve a reverse stock split, investors who would have been entitled to fractional shares of stock would instead receive a cash payment based on the proceeds from the sale.