Nikola (NASDAQ:NKLA) stock is plunging lower by more than 10% after the company filed a proxy statement to document the proposals at its upcoming annual meeting of stockholders. These proposals include a reverse stock split in a range between 1-for-10 and 1-for-30 and reducing authorized common stock to 1 billion from 1.6 billion. The date of the meeting has not yet been confirmed.
Nikola also seeks to increase the common stock available for issuance under the Nikola Corporation 2020 Stock Incentive Plan by 130 million shares. This proposal cannot be enacted unless the reverse split proposal is approved.
Included in the beginning of the filing is a letter from Chairman Steven Shindler recommending shareholders to vote in favor of a reverse split. Let’s get into the details.
NKLA Stock: Nikola Chairman Advises Shareholders to Vote in Favor of Reverse Split
NKLA stock is currently trading below the $1 level, which is an issue. Nasdaq sent the company a deficiency notice on Jan. 19 due to NKLA closing below $1 for 30 consecutive trading days. Nikola was provided with 180 calendar days, or until July 17, to close at or above $1 for at least 10 consecutive business days.
Nikola may receive another 180-day extension after the first if it is unable to achieve this. If its shares are still unable to close above $1 for at least 10 consecutive business days after the second extension, then Nasdaq will send Nikola a delisting determination.
“And as we move forward into 2024, we must focus on resetting our financial foundation,” said Shindler. “We need to eliminate the distraction of delisting and position ourselves to raise capital more effectively.”
A reverse split would consolidate the number of shares outstanding while increasing the stock price. Reverse splits can be used to cure a Nasdaq deficiency, although there are restrictions against excessive reverse splits. Shindler also points out that some investors are averse to lower-priced stocks, so a reverse split could attract new investors with a higher price.
Meanwhile, other meeting proposals include nominating nine directors to the board until the 2025 annual meeting and approving the compensation of named executive officers.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
