Rambus Opts To Split Stock, Hoping To Ease Volatility
By MARCELO PRINCE
NEW YORK -- Rambus Inc.'s (RMBS) executives and institutional holders were getting dizzy and nervous as day traders vaulted its share price higher and higher in recent weeks.
So the high-speed memory chip designer decided it would try to curb the stock's wild swings by boosting its float, or number of shares available for trading by the public. Day traders often prey on companies with small floats - Rambus has a float of just 15 million shares - because a large order to buy or sell shares can influence the stock's price dramatically.
On Friday the Mountain View, Calif., firm said it would split its stock 4-for-1 on June 15 for holders of record as of May 24. The move raises its number of shares outstanding from nearly 24 million to about 96 million. The company will also ask shareholders to approve an increase in the authorized number of shares to 500 million.
The stock, which leapt four-fold in the month of February, continued its meteoric rise Friday. It recently traded up 36 35/64, up 9.6% to 416 7/16 on volume of 1.8 million compared with average daily volume of 2.1 million shares. Earlier Friday it set an all-time high of 433.
Chief Financial Officer Gary Harmon told Dow Jones Newswires that some institutional holders had quietly suggested splitting the stock, and the company made the move hoping that if Rambus "increased the number of shares out there it would decrease the volatility."
But with 48,000 different shareholders and half its stock in the hands of retail investors, it's no guarantee that volatility will ease any time soon.
Rambus shares, which traded in a wide range of $60 to $100 during the past three years, broke out last month in frantic trading as momentum players stepped in. After starting February at 75 5/8, it ended the month at 301 5/8.
The market's enthusiasm was fueled by Intel Corp.'s (INTC) developer conference in Palm Springs, Calif., in mid-February where Intel executives voiced support for Rambus technology, saying its designs were key to its plans for higher-performing PCs.
The comments allayed some worries that had surfaced last fall when Intel was forced to delay release of a chipset using Rambus' memory technology because it discovered glitches in the product.
Since then, Rambus officials said it expects 7 million Rambus memory chips to ship in the first quarter for use in PCs along with 3 million chips for use in Sony Corp.'s (SNE) new PlayStation 2.
"Companies that do this (announce stock splits) signal things are looking very good in the future," Harmon said. "We're optimistic that that's our outlook for improving markets for Rambus."
-Marcelo Prince; Dow Jones Newswires; 201-938-5244 |
