Pitney Bowes Inc. recently announced its plans to delist its $2.12 Convertible Preference Stock from the New York Stock Exchange (the “NYSE”). The decision, which has already been notified to the NYSE, is expected to become effective by Apr 22, 2013.
The primary reasons attributed for the delisting were low number of shares outstanding and low daily trading volume. In such a scenario the listing fees and compliance administration costs appear to be burdensome for Pitney. Currently, the company has 23,928 shares of outstanding Preference Stock, significantly below the minimum number of shares specified by NYSE.
Although the stocks might continue to be traded at some of the over-the-counter markets, the company does not intend to relist it with any other exchange as of now. This delisting will not pertain to the terms of the stock in any way and will not affect the dividend payments.
As a result of this delisting, Pitney might lose investors' confidence, as it failed to meet the requirements of NYSE. This will likely make institutional investors skeptical of the stock, as individual investor will have access to less information about the company.
In this regard it is also to be noted that recently, Pitney announced a cash tender offer to purchase some of its Notes, with an intension to sell new debt securities through an underwritten public offering.
Currently, Pitney has $4 billion in its long-term debt. This in turn demands a high interest payout. Additionally, the market for mail processing equipment and mail services is shrinking globally.
Although management is attempting to transform Pitney to a cloud-based, service-oriented company, the results have not yet been able to surpass the declining revenue. During the last few quarters free cash flow was also impacted by higher working capital requirements due to the timing of disbursements and huge capital expenditure made during last few quarters.
Given its deteriorating cash flows, declining revenues from continuing operations and aggressive capex plans, it makes sense for PBI to cut down its debt as a part of its capital management plan. The resultant extension of maturities and lower operating cost would also support its cash balances.
Pitney currently has a Zacks Rank #3 (Hold),. Some other companies in the industry that are worth looking into include Lexmark International Inc. , Xerox Corporation and Symantec Corp. ( , each having a Zacks Rank #2 (Buy).