Noodles & Company may once more face the prospect of being delisted from stock exchanges.
In a challenging turnaround effort, American fast-casual restaurant chain Noodles & Company finds itself at a critical juncture, facing the possibility of delisting from the Nasdaq Stock Market due to a prolonged dip in its stock price. The company has received a delisting warning from the U.S. Securities and Exchange Commission (SEC) for violating Nasdaq listing rules.
Noodles & Company has 180 calendar days, until December 22, 2025, to regain compliance or seek an extension or transfer its listing to The Nasdaq Capital Market. The delisting could make it more difficult for investors to purchase stock for publicly traded companies, potentially impacting Noodles & Company's ability to raise capital.
To regain compliance, Noodles & Company has several options. One is to raise its stock price, which can be achieved through various means such as improving operational performance, strategic communications, or boosting investor confidence. Another option is to propose a reverse stock split, which would reduce the number of outstanding shares to increase the stock price, subject to stockholder approval.
If the company fails to regain compliance during the initial 180 days, it can apply to transfer its listing to the Nasdaq Capital Market, which would allow for an additional 180-day compliance period, provided the company meets all other applicable listing standards of the Capital Market. As a last resort, Noodles & Company can also appeal a delisting decision through a hearing process.
As of Thursday, Noodles' stock closed at about 73 cents per share, still below the $1 per share requirement for at least 10 consecutive days during the grace period. The reason for the warning is that Noodles & Company's stock price has fallen below $1 per share for more than 30 business days, violating Nasdaq listing rules.
Despite the challenges, CEO Drew Madsen remains optimistic, stating that the momentum was continuing in the second quarter, despite the challenging economic climate. In the first quarter, Noodles reported same-store sales up 4.4%, including a 1.8% increase in traffic. The company launched its biggest menu overhaul in company history earlier this year, aimed at improving the chain's reputation for pasta expertise.
This is the second delisting warning Noodles & Company has received in the past six months. The first one was on December 24, 2022. Over the past 52 weeks, the shares have ranged from a low of 55 cents to $1.93. Noodles & Company might consider proposing a reverse stock split, which would require stockholder approval, as a means to meet the Nasdaq listing requirements.
Investors will be closely watching Noodles & Company's progress over the coming months as the company works to regain compliance and secure its future on the Nasdaq Stock Market.
- The challenging economic climate faced by Noodles & Company in the restaurant industry could impact its ability to raise capital, as a delisting from the Nasdaq Stock Market could make it more difficult for investors to purchase stock for publicly traded companies.
- Facing a potential delisting from the Nasdaq Stock Market, Noodles & Company might consider proposing a reverse stock split as a means to meet the Nasdaq listing requirements, which would reduce the number of outstanding shares to increase the stock price, subject to stockholder approval.
