After 30 consecutive days of trading in which the minimum auction price of a business’s stock is less than $1 each share, Nasdaq will issue a deficit notice to the company. If a company receives a deficit notification from Nasdaq, it must make an official public statement disclosing the notice. In addition, if a company receives a deficit notice from the SEC, the company has four business days to submit Form 8K documents. If the company files a Form 8K that contains the requisite Nasdaq disclosure, the company will have met the Nasdaq disclosure requirement.
Reverse Stock Split: A Last Resort for Nasdaq Compliance
According to Nasdaq’s regulations, a company can escape delisting if its stock has a minimum auction price of $1 or higher for ten consecutive working days within the 180-calendar-days following the deficit notice date determined by the minimum auction price. For more information, please refer to Rule 5810(c)(3) of the Nasdaq Trading System.
A Nasdaq-listed firm may be applicable for additional 180-days provided the company meets certain criteria. When transferring to the Nasdaq Capital Market, a firm formerly featured on the Nasdaq International Market may be applicable for such additional 180 days. For more information, please refer to Rule 5810(c)(3)(A) of the Nasdaq Stock Market.
Nasdaq may, in its judgment, require the company to show its capacity to sustain long-term compliance by meeting the minimum auction price criterion for more than 10 consecutive working days, but normally not beyond twenty consecutive working days. Nasdaq may reckon the minimum auction price’s deviation from $1, the market cap, and the general direction of the stock price. The relevant provision of Nasdaq Regulation 5810(c)(3) is as follows.
If the deficiency is not cured by the end of the initial 180 cure period, the additional 180 period, Nasdaq will offer the firm a delisting, which will require the company to make another announcement under Nasdaq Rule 5810(b) and file under Form 8K report within four working days.
Within 7 calendar days following the delisting date, the company may ask to consider the delisting, which would put a hold on the halt and delisting until the hearing is completed. Companies frequently resort to reverse stock splits in order to meet the minimum auction price. Historical market responses to reverse stock splits mean that most firms wait till it is essential to implement such a move.
Mogo’s Nasdaq Listing in Jeopardy Due to Bid Price Deficiency
Mogo, a FinTech company based in Vancouver, was informed in writing by Nasdaq that its share price had fallen below the $1 threshold necessary to remain listed on the market. On Friday, Mogo received a letter informing it that its offer price had been too low for thirty consecutive working days. Mogo was given an initial term of 180 days, or till April 26, 2023, to come back into conformity with Nasdaq’s listing requirements.
The compliance period for Mogo could be extended by 180 days if the company cannot raise the price of its stock to at least $1 each share. Nasdaq has proposed a reverse stock split to help the company fix its bid price deficit, but if that doesn’t work, the company will receive a delisting letter at the end of the applicable compliance term.
Mogo’s Nasdaq Listing in Trouble as Share Price Falls Below Minimum
Mogo, founded by David Marshall Feller in 2003, provides a variety of financial services, including high-interest loans, mortgages with identity theft protection, credit scores, a Visa debit card, and access to a cryptocurrency trading platform via its partner exchange, Coinsquare. After raising $50 million in an initial public offering (IPO) in 2015, the firm began trading on the TSX (Toronto Stock Exchange), and in 2018, it listed its shares on the Nasdaq.
Mogo’s share price on the Nasdaq has dropped nearly 77% to $0.77 per share. March 2021 saw its all-time high value of $11.47; as of June of the current year, the price has been stable at around $1. Since around the middle of September, Mogo has often traded for less than $1. Mogo’s stock price on the TSX is $1.06 at the time of writing, and the company’s performance there has been consistent with that on the Nasdaq. After reaching a high of $14.35 CDN in March 2021, it has steadily declined in tandem with the rest of the public technology sector.
In response to Nasdaq’s bid price deficiency letter, Mogo stated that the company’s day-to-day activities would continue as usual and planned to re-establish compliance with listing regulations. Since the market and tech stock prices have continued to fall through the fourth quarter, Mogo’s possible delisting from the Nasdaq reflects the macroeconomic climate of crypto.
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The Globe and Mail claimed that certain companies might explore reprivatization after a drop in their stock values on the advice of financiers who led the career-high year of Canadian IPOs in prior years. According to the publication, only one of the twenty technology firms that appeared to be public in 2020 and 2021 has reverted to the private markets thus far; MindBeacon Holdings, a Vancouver health tech provider, was acquired by CloudMD for $116 million.
mCloud, a Canadian business that started trading on Nasdaq in November 2021, is close to meeting the minimum stock price threshold. The share price of mCloud has dropped by 91.58 percent year to date to $1.02 as of this writing. Big Tech is not immune to the effects of the worldwide tech bubble bursting. Investors in FAANG companies lost beyond $218 billion by Friday’s market closing and beyond $3 trillion throughout the year, making last week one of the most challenging for tech stocks.
Closure
Rule 5810(b) of the Nasdaq Stock Market stipulates that listed companies must have a minimum auction price of one dollar per share in order to remain in good standing with the exchange. If this condition is not fulfilled, a deficit notice will be issued, and the affected party will have up to 360 days to rectify the situation. The company risks being delisted if it is unable to rectify the situation and return to compliance. Canadian fintech firm Mogo may be delisted from Nasdaq after 30 days of trading at or below the minimum auction price. Delisting might have far-reaching effects on the company’s future operations and funding possibilities; the deadline to recover compliance is April 26, 2023.
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