MONTREAL — Plane and train maker Bombardier Inc, whose stock has hit its lowest level in Twenty five years, will quickly announce plans for a reverse stock split, two sources acquainted with the matter said, to be able to remain a part of Canada’s benchmark stock index.
The sources, who aren’t authorized to publicly discuss the plans, said Bombardier’s board of directors had already approved the plan prior to the stock dipped below $1 last week.
A Bombardier spokeswoman said the company does not discuss its share price or its stock in general.
Bombardier stock has declined more than 33 per cent year up to now, trading at 89 Canadian cents in Toronto on Wednesday, because it has struggled to find buyers because of its new 100-150 seat CSeries passenger jet.
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If the shares remain at these levels, the stock might get ejected from Canada’s benchmark S&P/TSX composite index, forcing index funds to sell the stock and putting more downward pressure on the stock price.
To be considered a element of the index, a stock should have a volume-weighted average price of $1 over the 3 months before the quarterly review. The following quarterly review is due at the end of February, and can cover the time from December through February.
A share consolidation, which would allow Bombardier to regain compliance with index rules, is expected to be announced once the company reports fourth-quarter results on Feb. 17, said one of the sources.
A reverse stock split wouldn’t change the worth of the company. The sources couldn’t say how many old shares would equal a brand new share.
Bombardier had 2.23 billion shares outstanding, as of October 2015.
The CSeries jet faces fierce competition from rival plane makers Boeing Co and Airbus Group SE. Small of the two CSeries planes, the CS100, which received certification in December from Transport Canada, is to enter service in 2016 after years of delays and vast amounts of dollars in cost overruns.
Broader concerns about the aerospace market also have hit shares of Bombardier rivals. Boeing’s stock has declined a lot more than 17 per cent since the start of year, while Airbus shares have dropped a lot more than 13 pe rcent.