Seattle cannabis marketplace company Leafly this week completed a 1-for-20 reverse stock split, consolidating its shares in an effort to remain compliant with Nasdaq listing requirements.
Leafly went public last year in a SPAC deal, reaching a peak stock price of more than $11 in April 2022. But since September of last year it has struggled to stay above the $1 per share minimum requirement set by Nasdaq.
Reverse stock splits are a tactic companies use to maintain compliance with minimum listing requirements by stock exchanges, without changing their market capitalization value. They are opposite from stock splitting, which is when public companies with high stock prices split up shares.
Last month, co-working giant WeWork announced it was doing a 1-for-40 reverse stock split to avoid being removed from the New York Stock Exchange after its stock dipped to $0.11.
Leafly shareholders approved the reverse stock split in July, and it went into effect on Tuesday. The company’s stock on Wednesday was trading at nearly $9 per share. The split does not change shareholder percentage interest in the company’s equity.
The company said this week that there is “no guarantee” it will meet the minimum bid price requirement. Leafly said in May that it was in a pending hearings process with Nasdaq and was aiming to regain compliance with the minimum bid requirement within 180 days.
Founded in 2010, Leafly’s online marketplace lets customers shop and select cannabis products from licensed retailers. The startup also serves as an educational resource. It generates revenue in part from monthly subscription fees paid by cannabis retailers to be listed on the platform and to access e-commerce tools.
Leafly is facing headwinds from decelerating digital ad spend and slowing sales across the marijuana industry following a pandemic surge.
Leafly reported second quarter revenue of $10.7 million, down 11% year-over-year, and a net loss of $1.4 million, down from a profit of $14.8 million in the year-ago period. Monthly active users dropped 6% to 7.3 million.
The company said it experienced churn from “out-of-business retailers and non-profitable accounts.”
“We are focusing on stabilizing our recurring revenue base while emphasizing annual subscription agreements to enhance long-term revenue predictability,” Leafly CEO Suresh Krishnaswamy said in a statement. “We remain focused on operating with efficiency and continuing on the path to profitability.”
The company laid off 21% of its staff in March.
Leafly is the latest firm in a string of cannabis companies to consolidate shares, including Organigram Holdings, Clever Leaves Holdings, and Agrify Corp, MJBizDaily reported.
