Flagstar Approves Reverse Stock Split to Bolster Share Price

Flagstar Bancorp (FBC) in Troy, Mich., is taking steps to shore up its stock price.

The $14.3 billion-asset company's board Tuesday approved a reverse split of outstanding shares that will give holders of Flagstar common stock prior to Oct. 24 one share for every 10 they own.

Flagstar said the transaction would help Flagstar continue to meet requirements of the New York Stock Exchange (NYX), which can suspend a company's shares from trading if the average closing price of its common stock is less than $1.00 over a consecutive 30 trading-day period.

Flagstar's shares have been trading below $1 for much of the last 14 months and are down 79% since it last completed a one-for-10 split in May 2010. Its shares were trading at $1.06 midday Thursday, up nearly 4% from Wednesday's close.

"The board believes that the reverse stock split, combined with our improving results, will further improve the market for Flagstar's common stock, making it more attractive to a broader range of investors and analysts, while also allowing the Company to regain eligibility for inclusion on the Russell index," Joseph P. Campanelli, said in a news release.

In July, Flagstar reported a profit of $86 million for the quarter that ended June 30. It was Flagstar's first quarterly profit in four years. The company has lost nearly $1.4 billion since 2007 as it faced a series of defaults on mortgage loans.

On Wednesday a federal judge ruled that Flagstar must stand trial in a lawsuit that alleges the company breached contracts for financial guaranty insurance on roughly $1 billion in residential mortgage-backed securities it issued during the run-up to the financial crisis.