Motorsport Games, the publisher behind NASCAR 21: Ignition that is also working on new IndyCar- and British Touring Car Championship-licensed titles, has been served a deficiency letter from the NASDAQ stock exchange for trading too low for a period of 30 days. If it can’t boost its share price before the end of the year, it could be kicked out of the market.
The letter, preserved by financial data site Docoh, reveals that NASDAQ alerted Motorsport Games on June 6 that it had failed to comply with Rule 5550(a)(2), which requires that “listed securities” must “maintain a minimum bid price of $1.00 per share.”
Closing below $1 for 30 days places a company in a 180-day compliance status, which is where the publisher finds itself now. It will need to record a price above $1 for 10 consecutive days before December 5. If that doesn’t happen, it could plead for another grace period, according to NASDAQ:
If the Company does not regain compliance with the Rule by December 5, 2022, the Company may be eligible for an additional 180 calendar day compliance period, provided that it meets the continued listing requirement for the market value of publicly held shares and all other initial listing standards, with the exception of the bid price requirement, and notifies the Staff of its intention to cure the deficiency during the additional compliance period.
In the meantime, Motorsport Games is considering a reverse stock split, which would consolidate outstanding shares to raise their value above the necessary threshold:
The Company intends to continue monitoring the bid price for its Class A common stock and will consider various options available to it if its Class A common stock does not trade at a level to regain compliance with the Rule. These options include effecting a reverse stock split designed to increase the bid price of the Company’s Class A common stock in an amount sufficient to regain compliance with the Rule, provided that there can be no assurances that a reverse stock split will be consummated or that it will achieve its intended effects.
The past year has not been easy for Motorsport Games. NASCAR 21 Ignition launched in an extremely rough state, reportedly pushing the racing series to attempt to find ways to vacate its contract with the publisher. A new NASCAR game will not be released in 2022, so the developers can concentrate on making the 2023 iteration a higher-quality product.
Earlier this month, Motorsport Games announced its BTCC title had been delayed until 2024. Worst of all, back in March, the company stated in its 2021 financial report that it feared existing cash on hand wouldn’t be enough to keep it afloat for “at least the next 12 months.”
When Motorsport Games went public in February 2021, it opened at $26.85 a share. It was down to $10 by August of that year before a brief bump up to $14, and then slid again. This past April it dropped below $1 for the first time.
Instilling confidence in investors will be difficult without releases, but the publisher has to take time to ensure its new titles are good enough or they’ll do more damage in the long run, as we’ve seen with NASCAR 21. Motorsport Games released the first images of its 2023 IndyCar title over the Indy 500 weekend last month; they’re not much more than shots of a generic, livery-less Dallara chassis model, but the company will need to find ways to drum up enthusiasm to survive the rebuilding year ahead.