Recently, LXEH. US announced that Nasdaq has decided to grant the company an additional compliance period until January 31, 2024, in order for the company to undergo a reverse stock split and meet the minimum stock price requirements thereafter.
Merger of shares to rescue stock prices
In the announcement, Lixiang Education stated that NASDAQ also proposed that the company's reverse stock split must comply with the following terms: first, the company must obtain approval from the board of directors on or before November 30, 2023, in a proportion sufficient to regain and maintain long-term compliance with bidding price rules for the reverse stock split. The company must provide the team with the latest information on the approval of the reverse stock split on December 1, 2023.
In addition, Lixiang Education is required to conduct a reverse stock split on or before January 5, 2024, and maintain a closing price of $1 for at least 10 consecutive working days thereafter. On or before January 31, 2024, Lixiang Education should demonstrate compliance with the bidding price rules by proving that the closing price for at least 10 consecutive trading days is $1 per share or more.
In the announcement, Lixiang Education stated that on November 30, 2023, it was approved by the board of directors to revise the American Depositary Shares ("ADS") ratio representing its common stock. Adjust from 5 ordinary shares per ADS to 50 ordinary shares per ADS, and provide the committee with an update on the approval of the ADS ratio change on December 1, 2023.
Lixiang Education is expected to comply with the remaining terms during the exception period in order to comply with the bidding price rules again. If our company fails to comply with the purchase price rules again within the exceptional period, its securities will be delisted.
Wandering on the brink of delisting
From the stock price perspective, as of now, the stock price of Lixiang Education is only 0.579 US dollars, and the stock price has been below the red line of one US dollar for a long time. It is reasonable to choose a reverse stock price split at this time.
Regarding reverse stock segmentation, analysis suggests that it is a measure taken by companies to reduce the number of circulating shares in the market. The existing shares are merged into fewer, proportionately more valuable shares in order to boost the company's stock price. In the process of reverse stock split, the company cancels its current circulating shares and distributes new shares to shareholders based on the number of shares held by shareholders before the reverse split.
Usually, a reverse stock split has no inherent impact on a company's value, and its total market value remains unchanged after execution. The company's circulating shares have changed less, but the increase in stock price is directly proportional to the reverse stock split. The total value of stocks held by investors should also remain unchanged, and the total amount of dividend payments should also remain unchanged.
It is worth noting that this is not the first time that Lixiang Education is approaching the brink of delisting.
On September 15, 2022, it received a delisting risk warning from NASDAQ, requiring the company to have at least 400 public holders in order to continue listing on the NASDAQ global market, but Lixiang Education did not comply with this rule. It is required that they submit a solution within 45 working days, otherwise they will not be able to retain their listing qualification on the NASDAQ global market.
On November 25, 2022, Lixiang Education received an extension notice from NASDAQ, allowing it to fail to meet the minimum public holder requirement by January 31, 2023.
On February 6, 2023, Lixiang Education received a letter from the NASDAQ Listing Qualification Department confirming that it has re met the listing rules that require the company to have at least 400 public holders to continue listing on the NASDAQ global market.
Losses continue to expand
In addition to the continued low stock price, the performance of Lixiang Education has also tended to be weak.
In the first half of 2023, Lixiang Education achieved a total revenue of 25.9907 million yuan, a year-on-year increase of 14.23%. In terms of profit, Lixiang Education achieved a gross profit of 6.1 million yuan in the first half of the year, a year-on-year increase of 12.96%. The net loss was 8.2497 million yuan, an increase of 63.37% year-on-year.
In terms of expense costs, the revenue cost in the first half of the year was 19.9 million yuan, an increase of 14.37% year-on-year. Mainly including an increase of 3.3 million yuan in teacher salaries, bonuses, social security, and benefits, mainly due to the optimization of the teacher structure and the increase in salaries to motivate teacher enthusiasm; The rental cost and other water and electricity expenses increased by 600000 yuan, partially offset by a decrease of 1.6 million yuan in wages and benefits for flexible employment comprehensive service interns.
The total operating expenses were 12.6 million yuan, a year-on-year decrease of 25.44%. The general and administrative expenses were 12.2 million yuan, a year-on-year decrease of 23.19%, mainly due to the optimization of management structure and cost control, resulting in a decrease of 2.8 million yuan in wages, bonuses, social security and welfare expenses; And the decrease in rental market prices after the epidemic resulted in a decrease of 500000 yuan in rental expenses. The sales and marketing expenses were 400000 yuan, a year-on-year decrease of 60.15%, mainly due to the reduction in training expenses for marketing personnel.
As of June 30, 2023, the total cash and cash equivalents as well as short-term investment balance of Lixiang Education was RMB 240.1 million, a decrease of 2.71% from RMB 246.8 million as of December 31, 2022.