It’s not often a publicly traded company can predict with certainty when its share price will balloon.
Indianapolis-based Kite Realty Group Trust hopes such a surge will attract the interest of indifferent investors, although the value of Kite holdings will remain the same.
Kite is engineering a 1-for-4 reverse stock split—essentially converting every four of its 332.7 million outstanding shares into a single share. The reverse split is set to take place after market trading on Aug. 11.
Correspondingly, Kite’s share price will quadruple, although the value of investors’ holdings will remain the same.
For example, Kite shares on Tuesday morning were trading at $6.32 each. Four shares would be worth $25.28. After a 1-for-4 reverse split, an investor with four shares would have a single share, worth the same $25.28.
Shares for the Indianapolis-based real estate investment trust have languished in the $6 range the last 18 months, even through the stock market’s raging bull run in 2013.
Adam Basch, Kite’s chief investment officer, said the firm hopes that moving the stock price into double digits will give shares a more stable foundation and an image makeover of sorts.
“Shares under $10 in general have a lot more volatility, because they’re often targeted by high-frequency traders,” Basch said. “So, a higher price reduces volatility.
“It can also broaden the universe of potential investors. There are certain funds and institutional owners who don’t invest in single-digit stocks.”
The reverse split doesn’t change much for Kite, he said. “It’s more of an optical change that we think benefits our investors.”
The move will reduce the number of outstanding shares to 83.2 million, which puts Kite more in line with its peers, Basch said.
Kite officials also are hoping for a bump in share price due to the firm’s recent $1.2 billion acquisition of Illinois-based Inland Diversified Real Estate Trust Inc. The deal gives Kite $4 billion in assets and swells its roster of properties from 74 to more than 130.
“There are a lot of things affecting [the stock] because of this merger that have not yet cleared out," CEO John Kite said in an interview with IBJ last week. "We think there’s a lot of upside. We hope that the market will recognize it.”
“Especially after a merger where you’re doubling the size of your company, it takes some time for that to resonate,” he said. “But once we begin posting our numbers as a combined entity and investors can see what we’re doing, and the trajectory ahead of us, we feel like we should be awarded for that.”