Washington Prime Group (NYSE: WPG) made headlines a few months ago when the mall real estate investment trust (REIT) filed for Chapter 11 bankruptcy protection after the COVID-19 pandemic sent its already struggling business spiraling downward.
A significant portion of the company's tenants ended up going out of business or closing underperforming locations, and others were unable or unwilling to pay their rent arrears. As a result, Washington Prime's rental income dropped by $127 million year over year in 2020. Drowning in nearly $3.5 billion in debt at the time, Washington Prime voluntarily filed for Chapter 11 in June.
Washington Prime plans to delist its stock
Fast-forward to the present, and Washington Prime just announced that it intends to voluntarily delist its stock from the New York Stock Exchange (NYSE). The company plans to file a Notification of Removal from Listing later in September and anticipates that the last day its common and preferred shares (WPG-H) will trade on the NYSE will be Thursday, September 29.
Unlike many stocks that end up delisting, Washington Prime isn't planning to list its shares on any other exchange or make its stock available for trading on the over-the-counter (OTC) market.
The reason for the planned delisting, as you might expect, has to do with the company's bankruptcy filing. As Washington Prime said in its press release:
"Because the Company's Common Stock and Preferred Stock will no longer be publicly held upon its expected emergence from its previously announced Chapter 11 proceedings, the Company believes that the costs and expenses associated with the continued listing of the Common Stock and Preferred Equity, and the corresponding governance and filing requirements, are not economically justified."
In other words, since none of the company's stock will be held by non-insiders once the company emerges from bankruptcy in the coming months, Washington Prime doesn't see any good reason to maintain a public market for its shares.
This move comes just days after a U.S. bankruptcy judge signed off on the company's plan to exit Chapter 11. The plan will allow the company's creditors to swap their debt holdings for ownership and will effectively take Washington Prime private.
What it means for investors
Unsurprisingly, Washington Prime stock plunged after the delisting announcement. Bargain-hunting investors had been hopeful that their shares would still have some value after the bankruptcy proceedings.
As of Friday, September 10, Washington Prime shares trade for just over $1, and the company's market cap is below $28 million. For context, Washington Prime's market cap has been as high as $300 million in 2021 and was more than $2 billion five years ago.
As part of Washington Prime's plan to exit bankruptcy, $20 million in "cash recovery" has been set aside for common shareholders, which works out to about $0.82 per share. To be perfectly clear, this is the stock's intrinsic value at this point, and it's roughly 30% below the stock's price as of this writing.
If you invest in real estate and own Washington Prime's common stock, it's looking like a smart time to sell while you still can. Shareholders have an option to elect to receive equity instead of this cash payment, but without a public market to trade the stock, it doesn't seem like the best option.
The Millionacres bottom line
The bottom line is that Washington Prime is being taken private, and investors who own shares will receive $0.82 per share upon the delisting of the company's common stock. If the stock is trading for more than $0.82 per share when you're reading this, you might want to consider heading for the exits.