Will reverse stock split save National Coal?

The not-so-good times continue for National Coal Corp. The Knoxville-based coal producer on Tuesday said its board had approved a 1-for-4 stock split.

Trading of the split stocks began today.

Reverse stock splits reduce the number of shares outstanding. This increases the value of individual shares but does not change the market value of the company’s total shares outstanding.

It’s all about appearances, or making the stock look more valuable than it really is. But will it be enough to bring National Coal a reversal of fortune?


In a reverse split, If you own, say, 10 shares worth $1 each for a total of value of $10, after a 1-for-2 reverse split, you would own five shares worth $2 each for a total value of $10.

Companies often do reverse splits when they have been delisted from a stock exchange or are trying to avoid delisting.

In National Coal’s case, it’s the latter.

Last week, Nasdaq notified National Coal it was not in compliance with Nasdaq listing rules because the market value of its stock was less than $15 million for 30 consecutive days.

The company has until Dec. 13 to come into compliance, according to a filing with the Securities and Exchange Commission.

National Coal’s shares are temporarily traded under the symbol NCOCD.

National Coal has been fighting financial troubles for more than a year. In July 2009 its subsidiary National Coal of Alabama defaulted on a $60 million loan. The next month the company slashed the salaries of its top executives by 10 percent in response to heavy losses.

In April this year it sold its New River Tract in East Tennessee for $11.8 million to repay a loan that was in default. Last month, the company’ s wholly-owned subsidiary NC Railroad Inc sold a short-line railroad that runs between Oneida and Devonia, Tenn. for $3 million.

In the first quarter the company lost $5.8 million, but CEO Daniel Roling tried to put a positive spin on the rest of the year.

“Although we continue to face a number of challenges, we are committed to positioning the Company to take advantage of any positive growth opportunities afforded throughout the year,” Roling said in a press release.