Pier 1 2009 Annual Report Download - page 121

discourage individual brokers from recommending low-priced stocks to their customers. In addition,
some of those policies and practices may function to make the processing of trades in low-priced stocks
economically unattractive to brokers. Moreover, because brokers’ commissions on low-priced stocks
generally represent a higher percentage of the stock price than commissions on higher-priced stocks,
the current average price per share of common stock can result in individual shareholders paying
transaction costs representing a higher percentage of their total share value than would be the case if
the share price were substantially higher. However, some investors may view the reverse stock split
negatively since it reduces the number of shares of common stock available in the public market.
Reducing the number of outstanding shares of Pier 1 Imports’ common stock through the reverse
stock split is intended, absent other factors, to increase the per share market price of Pier 1 Imports’
common stock. However, other factors, such as our financial results, market conditions and the market
perception of our business may adversely affect the market price of Pier 1 Imports’ common stock. As
a result, there can be no assurance that the reverse stock split, if completed, will result in the intended
benefits described above, that the market price of Pier 1 Imports’ common stock will increase following
the reverse stock split, that the market price of Pier 1 Imports’ common stock will not decrease in the
future, or that Pier 1 Imports could fall below other continued listing criteria of the NYSE.
Effects of the Reverse Stock Split
General
If the reverse stock split is approved and implemented, the principal effect will be to
proportionately decrease the number of outstanding shares of Pier 1 Imports’ common stock based on
the reverse stock split ratio selected by the board of directors. Pier 1 Imports’ common stock is
currently registered under Section 12(b) of the Securities Exchange Act of 1934 (the ‘‘Exchange Act’’)
and we are subject to the periodic reporting and other requirements of the Exchange Act. The reverse
stock split will not affect the registration of Pier 1 Imports’ common stock under the Exchange Act, or,
except as described above, the listing of Pier 1 Imports’ common stock on the NYSE. Following the
reverse stock split, Pier 1 Imports’ common stock will continue to be listed on the NYSE under the
symbol ‘‘PIR,’’ although it will be considered a new listing with a new CUSIP number.
Proportionate voting rights and other rights of the holders of Pier 1 Imports’ common stock will
not be affected by the reverse stock split, other than as a result of the treatment of fractional shares as
described below. For example, a holder of 2% of the voting power of the outstanding shares of Pier 1
Imports’ common stock immediately prior to the effectiveness of the reverse stock split will generally
continue to hold 2% of the voting power of the outstanding shares of Pier 1 Imports’ common stock
after the reverse stock split. The number of shareholders of record will not be affected by the reverse
stock split (except to the extent any are cashed out as a result of holding fractional shares). If approved
and implemented, the reverse stock split may result in some shareholders owning ‘‘odd lots’’ of less
than 100 shares of Pier 1 Imports’ common stock. Odd lot shares may be more difficult to sell, and
brokerage commissions and other costs of transactions in odd lots are generally somewhat higher than
the costs of transactions in ‘‘round lots’’ of even multiples of 100 shares. The board of directors
believes, however, that these potential effects are outweighed by the benefits of the reverse stock split.
Effectiveness of Reverse Stock Split
The reverse stock split, if approved by the shareholders and implemented by the board of
directors, would become effective upon the filing and effectiveness (the ‘‘Effective Time’’) of a
Certificate of Amendment to our Certificate of Incorporation with the Secretary of State of the State
of Delaware. It is expected that such a filing would take place promptly after any implementation of a
reverse stock split by the board of directors, assuming the shareholders approve this proposal. However,
the exact timing of the filing of the amendment will be determined by the board of directors based on
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