Time Warner said Friday that its shareholders have approved a reverse stock split that would take effect once the media giant separates its Time Warner Cable businesses.
About 84% of shareholders approved a 1-for- 2 or 1-for- 3 reverse split at a special meeting on Jan. 16. The actual split will not take place until after the TWC separation is completed, the company said.
Time Warner first announced its intention for the reverse split in November. The proposal was based on the expectation that following the separation of the cable unit, the market price and trading ranges for Time Warner stock may be significantly lower than their current ranges.
Reverse splits are a common practice and are usually done to boost the value of the shares. In a reverse split, the number of shares outstanding changes, but the market value remains the same. So a stock that is priced at $2 per share with 12 million shares outstanding becomes a $6 stock with 4 million shares outstanding in a 1-for-3 reverse split.
Time Warner shares were up 12 cents (1.3%) to $9.55 each in afternoon trading Friday, while TWC shares were down 49 cents (2.5%) to $18.85 per share.