NaviSite Seeks Reverse Stock Split

Web hosting company NaviSite is asking shareholders to approve a reverse stock split in order to boost the price of its shares, according to documents filed by the company this week with the U.S. Securities and Exchange Commission.

According to the documents, NaviSite, based here, is asking shareholders via proxy to support proposals giving its board of directors the authority to institute the split at ratios ranging from 1-for-5 up to 1-for-15 at any time before the company's next annual meeting.

Shareholders are scheduled to vote on the proxy at this year's annual meeting on Dec. 19.

The goal of the split would be to raise the price of NaviSite shares to $4 and ward off the stock's potential delisting from the Nasdaq for trading too long below $1 per share, according to the filing.

Nasdaq delists companies that post a closing bid price of less than $1 for 30 consecutive sessions. However, that requirement has been suspended until Jan. 2 in the wake of the Sept. 11 terrorist attacks.

NaviSite received a warning from the Nasdaq in September that its delisting was imminent, according to the documents.

The reverse split "could encourage interest in the NaviSite Common Stock and possibly promote greater liquidity for the Company's stockholders, although such liquidity could be adversely affected by the reduced number of shares outstanding after the reverse stock split," the company said in the documents.

NaviSite found new life at the end of October when it received $65 million in financing from parent company CMGI and Compaq Financial Services--money that CEO Tricia Gilligan said is enough to sustain the hosting company until it reaches profitability.

During NaviSite's fourth-quarter earnings call the month before, Gilligan told analysts the company would run out of money within three months if it didn't find additional funding or a buyer.

Shares of NaviSite were down 11 cents, or 22 percent, at 39 cents in Thursday afternoon trading.