Bombardier Continues Stock Consolidation Plan to Boost Share Price
Bombardier Inc. BBC-AT has a plan to boost its declining stock price: a stock consolidation that will take millions of its shares off the market.
Such consolidation is often known as a reverse stock split. Companies with a high price per share often experience a normal stock split: for example, a 2-for-1 split doubles the number of shares and halves the price per share. However, there is no real economic change in shareholder value.
A reverse split works in the opposite direction: companies with low stock prices ask their shareholders to turn over several shares to get only one in return. The price per share increases, even if the economic value does not change.
Bombardier says it will likely choose a ratio between 1:10 and 1:30, meaning its shares, which closed at $1.50 on the Toronto Stock Exchange on Friday, would instead trade between $15 and $45. Shareholders will vote on the proposal at the company’s annual meeting on May 5.
As of March 7, Bombardier had outstanding 308,734,229 Class A shares, each having 10 votes at the company’s annual meeting, and 2,133,526,542 Class B subordinate voting shares, with one vote each.
The share classes will be consolidated at the same ratio if the vote passes, Bombardier spokesman Mark Masluch said, meaning the vote balance between the two would be maintained.
“It’s about rationalizing the total volume of Bombardier shares,” he said. “Each shareholder will retain the same value and the same voting rights.”
Explaining the reasons for the decision, Bombardier said in its management circular filed Friday that it believes it is desirable for its shares to trade at a higher price. A raise “could increase the interest of the financial community in the company and potentially broaden the pool of investors who may consider investing or be able to invest in the company.”
This could potentially increase trading volume and liquidity, Bombardier believes. And that could help attract institutional investors who have internal policies that prohibit them from buying stocks below a certain minimum price, and investment dealers who discourage their brokers from recommending those stocks to clients.
Bombardier Class B shares last traded above $3 in March 2019 and last traded above $5 in August 2018. For approximately one year ending May 2021, they are constantly trading below $1.
Also on Friday, Bombardier disclosed that it paid CEO Eric Martel US$6.11 million in 2021. Mr. Martel earned US$2.96 million in 2020 after starting with the company on April 6 from the same year.
Mr. Martel had a salary of US$900,900 in 2021 and stock and option awards valued at US$2.8 million. He received over US$2 million in short and long term cash bonuses.
Other Bombardier executives who have spent all of 2020 and 2021 with the company have seen their salaries increase markedly.
Peter Likoray, senior vice president of new aircraft sales, earned US$3.55 million, up from US$1.68 million a year earlier. His salary included a bonus of US$1.94 million, up from US$1.16 million in 2020.
Daniel Brennan, the company’s senior vice president for people and sustainability, earned US$2.82 million, up from US$1.55 million in 2020. He received a retention bonus of 785,600 US dollars following Bombardier’s sale of its railroad division to French giant Alstom, plus US$702,600 in short- and long-term cash bonuses.
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