J.Jill Inc. is moving forward with a reverse stock split.
The struggling womenswear chain announced today that its board of directors approved a measure in which its shareholders will receive one new share of its common stock for every five shares that they held prior to Monday, when the move is expected to take effect. (Shareholders who have any fractional shares in the retailer will receive cash.)
If completed, J.Jill’s common stock will begin trading on a split-adjusted basis on the New York Stock Exchange at the market open on Nov. 10.
A reverse stock split, which reduces the number of outstanding shares in a company, is intended to increase that company’s per-share trading price in order to prevent it from being delisted. Once effective, the number of authorized shares of J.Jill’s stock will decrease from 250 million to 50 million.
Although a company’s total market capitalization generally remains the same after a reverse stock split, shares of J.Jill plummeted nearly 10% following this morning’s news. As of 3:00 p.m. ET, its stock was down more than 5% to 71 cents. (Stocks that fall below $1 are at risk of being delisted from the NYSE, which has minimum share price rules.)
The move comes a month after J.Jill announced that it had closed an out-of-court transaction with lenders — effectively staving off a bankruptcy filing. As part of the agreement, the Quincy, Mass.-based retailer now has at least $15 million in new capital, while the maturity of its term loan debt has been extended to May 2024.
According to the chain, the arrangement allows it to continue to meet its obligations to its vendors in full as well as maintain business operations amid the coronavirus pandemic. Over the past several months, J.Jill had been teetering on the brink of insolvency as its forbearance period has been extended multiple times by lenders. To reduce expenses, it previously drew down $33 million under its revolving credit facility, as well as furloughed store associates, cut back on the base salaries of its executive officers and had foregone its board of directors’ fees. It also revealed plans to permanently close 11 locations this year for a total of 275 remaining stores by the end of fiscal 2020.