Nasdaq gives Allbirds six months to pick up its act
Allbirds was issued a price noncompliance warning by the Nasdaq yesterday, triggered by its shares trading at under US$1 for 30 consecutive days.
The notice kicks off a process that could end in the Kiwi-American firm being delisted from the exchange.
The maker of eco-friendly shoes featuring New Zealand merino wool can avoid that fate if it manages to trade over US$1 for a minimum 10 consecutive days or more over the next 180 days — that is, before September 30.
In certain circumstances, it would appeal for another 180 days.
“If they did delist, which is the worst-case outcome, then we would expect it would involve some sort of take-private transaction where a private equity firm would fund buying the business then looking at options — more likely M&A than relisting the company,” said Clare Capital investment banker Alex Gordon.
“That said, staying listed and a share consolidation or some form of restructuring the business is the outcome we would expect to see.”
Allbirds could reach compliance simply by halving its shares in a 2:1 consolidation (for a US$1.28 share price, based on recent trades).
A firm must stay above a minimum market cap as it consolidates its shares, but the threshold is a modest US$1 million. Although more than 90 per cent off its high, Allbirds’ market cap at around US$99m is still well above that minimum.
“It’s not a good position for the company at all,” Gordon said.
“It shows the challenges for running any business in a listed setting — especially in the US. It’s not good for Tim [Allbirds Kiwi founder Tim Brown] and all shareholders. It will be hard work.”
Gordon and Clare Capital principal Mark Clare both hold Allbirds shares personally.
Allbirds shares, which opened at US64c, sank to US62c on the news. They were recently trading flat.
Allbirds listed on the Nasdaq in November 2021 at US$15 per share. Its shares rose 91 per cent to US$28.64 by the close of its first day of trading — valuing the firm at just under US$4 billion and Brown’s minority stake at US$459m ($650m).
But a series of disappointing quarters during the pandemic, compounded by the Wall Street Journal raising durability issues and claiming Allbirds had lost its brand cachet, saw its stock hammered.
Faced with mounting losses and reversing revenue, Allbirds has replaced nearly all of its executive team over the past year with figures from more traditional firms.
Brown stepped down as co-chief executive in May last year as the firm’s challenges mounted, leaving Joey Zwillinger in sole charge at the top.
In March, Zwillinger was replaced as CEO by Joe Vernachio, a former global operations head for The North Face (Zwillinger, like Brown, remains on the board).
In January, Allbirds named chief marketing officer Kelly Olmstead (formerly brand activation VP for Adidas) and a new chief design officer, Adrian Nyman, formerly Nike’s creative director for global retail.
On March 13, Allbirds reported a fourth-quarter net loss of US$56.8 million, taking its full-year net loss to US$152.5m — compared to the prior year’s US$101.4m in red ink.
Fourth-quarter revenue fell 14.5 per cent to US$72m, while full-year revenue was down 14.7 per cent to US$254m.
The firm forecast an even tougher year ahead. A restructure under way involves store closures (not including the firm’s Auckland shop) and a new distributor-based model to replace direct sales.
Allbirds has been asked for comment.
In a statement posted to the Nasdaq, the firm said it would “consider actions that it may take in response to this notification” to become compliant with Nasdaq listing requirements, but added “no decisions about a response have been made at this time”.