Could Exela Technologies (NASDAQ:XELA) stock literally become a penny stock (as in, worth just a penny per share), or even go to zero? Don’t assume that everything will be all right with Exela Technologies, as the company is prone to fraying fundamentals and ongoing noncompliance with exchange-listing requirements.
Based in Texas, Exela Technologies apparently specializes in a business process automation (BPA). You may be interested in artificial intelligence (AI), but don’t confuse Exela’s business model with those of more successful machine-learning companies.
Sure, automation is here to stay and you might want to gain exposure to its growth in the 2020s. Yet, you can choose a business to invest in that doesn’t have Exela Technologies’ alarming set of problems.
XELA Stock Can’t Seem to Find Its Footing
Plenty of technology stocks have performed well in 2023 so far, and many of them soared in January. XELA stock, in contrast, actually fell in January and appears to be struggling in February.
It seems that the remote-work boom of 2020 that benefited Exela Technologies and its stakeholders, isn’t providing a tailwind anymore. Lately, the stock market’s weighing machine has determined that Exela’s future prospects are dim.
The company’s most recently released quarterly financial report indicates shrinking revenue, dwindling cash and cash equivalents and a widening net earnings loss. Overall, Exela Technologies is a fiscal failure.
It’s also a bad sign that Exela failed to make the interest payments on some senior secured notes. The ones that are due in 2023 require 10% interest payments, while the notes due in 2026 involve 11.5% interest payments. So, it’s going to be costly for Exela Technologies to pay off its debt, if the company can actually manage to pay it.
Delisting Is a Distinct Possibility for XELA Stock
In another unsettling development, Exela Technologies has scheduled a hearing for March 2. The hearing is about how Exela intends to avoid being delisted from the Nasdaq exchange.
This slow-moving train wreck has been going on for a while. Exela has already received multiple noncompliance notices from the Nasdaq exchange, which could delist XELA stock if it continues to close below $1 per share.
One can only wonder what “solutions” Exela Technologies’ management will propose at the hearing. Don’t be shocked if a reverse stock split is enacted at some point. This could provide a quick fix, but wouldn’t address Exela’s fundamental problems.
What You Can Do Now
XELA stock is nowhere near the crucial $1 threshold. That’s bad news as Exela Technologies undoubtedly wants to regain compliance with the Nasdaq exchange’s listing requirements.
This will be easier said than done unless Exela implements a reverse share split. Sometimes, however, reverse splits indicate that a company isn’t dealing with its foundational issues.
Among those issues is Exela Technologies’ debt, which requires sizable interest payments. All in all, XELA stock fully deserves an “F” rating and is a no-go for cautious investors.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.