This has been a dismal year for stocks that flew high during the worst of the pandemic.
Inflation and macroeconomic fears have weighed on the markets in 2022, and a number of stocks of companies that did well when people were stuck at home have been hurt.
And one stock in particular, mobile-games operator Skillz (SKLZ), has weakened to the point that it's in jeopardy of losing its listing on the New York Stock Exchange.
This week, Skillz disclosed that it had received a notice from the New York Stock Exchange that it was in danger of being delisted because its stock had traded below $1 for 30 consecutive trading days.
The company isn't giving up, however, saying that it plans to notify the NYSE by Jan. 3 that it intends to cure the deficiency.
Skillz received the notice from the NYSE on Dec. 16. To become compliant again, Skillz's share price must close at $1 or higher on the last trading day of any calendar month during the six months after it received the notice.
The company must also average a closing share price of at least $1 over the 30-day trading period that ends on the last trading day of that month.
Skillz Has Options to Fix the Problem
Skillz, which operates mobile games like Blackout Bingo and Solitaire Cube, says it will consider a bunch of alternatives to again become compliant with NYSE rules.
One is executing a reverse stock split, subject to approval by its stockholders.
A reverse split reduces the number of shares outstanding but proportionately lifts the price of each post-split share.
For example, consider a 1-for-10 reverse split of a stock trading at $1. Every 10 shares of that stock become one share. But the price of that one share is multiplied by 10, to $10.
NYSE rules dictate that if a company attempts to cure its stock price deficiency by an action that will require a shareholder vote, like a reverse stock split, the price condition will be deemed cured if the share price promptly exceeds $1 and remains at or above that level for at least the following 30 trading days.
Reverse stock splits have been a mixed bag for the companies that have initiated them.
Major companies like Priceline.com (BKNG) and AIG (AIG) have performed well since they initiated reverse splits, while others, like Sun Microsystems, which eventually went private, did not fare as well.
Skillz's Rise and Fall
Skillz was soaring in summer 2021, when it said it was acquiring marketing platform Aarki for about $150 million of cash and stock.
The day it announced the acquisition, the shares climbed more than 20% to $20.86.
Skillz, which was founded in 2012, had about 277 employees at the time, with an equity valuation of about $3.5 billion.
In April that year, Jefferies analyst Andrew Uerkwitz initiated coverage of Skillz with a hold rating and a $17 price target, while Cathie Wood's ARK Investment Management bought shares of the e-sports platform.
Today, Skillz shares at last check were trading at 58 cents, giving it a market capitalization of under $256 million.
In early November Skillz reported its nine-month loss widened to 70 cents a share from 43 cents in the year-earlier period. Revenue fell 18% to $275.2 million.
“This has been a challenging year for Skillz and though there is no quick fix, the path to reaccelerating growth is now well-defined across the company,” Skillz CEO Andrew Paradise had said in a statement.
“We have identified the things we can and cannot control and have a plan in place which focuses on four key pillars to enable us to return to durable growth and long-term profitability.
“These include right-sizing the organization; enhancing the platform to improve customer success and engagement; rehauling our go-to-market strategy; and demonstrating a clear financial path to profitability.”
