Motorsport Games Face Another Potential NASDAQ Delisting

Having avoided removal from the American stock exchange at the end of 2022, now Motorsport Games face another potential NASDAQ delisting. Last time the full Board of Directors resigned, but the company was able to regain compliance by a reverse share split, combining them into a smaller number to raise prices above the minimum level required

Now they’ve received another deficiency letter from NASDAQ, notifying the company that is is ‘not in compliance with the minimum sockholders’ equity requirement of at least $2,500,000′. The SEC filing notes that in the quarter ending September 30th, 2023, the company reported stockholders’s equity of $498,897, and also didn’t meet alternative standards including ‘net income of $500,000 from continuing operations in the most recently completed fiscal year or in two of the three most recently completed fiscal years.’

As a result the company has 45 calendar days, or until January 2nd, 2024, to submit a plan to regain compliance. If that’s accepted, then they have up to 180 days to put it into action.

What this could mean for Motorsport Games

Having already issued a a reverse share split in recent months, the options may be more limited this time around as you need to have a minimum of 500,000 publicly held shares to remain listed. Dipping under it for a second time in 12 months may be an issue. But the alternatives also seem to be ruled out, and having sold the NASCAR license, losing both the Indycar and BTCC licenses with potential payments now due, and cutting staff, it’s difficult to see any reason why the share price would rise any time soon.

It also means the deadline for a plan falls more than a month before the postponed launch of Le Mans Ultimate, currently due on February 20th, 2024.

Delisting doesn’t mean Motorsport Games is finished, but unlisted shares are more difficult for investors to research, purchase or sell. Which means it’s much harder to raise money in the future, and the shares lose even more value. And while some companies choose to voluntarily delist themselves to go private, involuntary removal is much more of a problem if you’re looking for funding. And as has become tradition, the latest Motorsport Games financial report stated ‘the company does not believe it has sufficient cash on hand to fund its operations over the next year and that additional funding will be required’.

If it was to signal the beginning of the end, that would leave questions over the future of rFactor 2 and the Studio 397 team also working on Le Mans Ultimate, the IP of KartKraft following the original development team being laid off, and the future of former 704 Games employees currently supporting their previous NASCAR titles until the end of 2024 under the agreement with new license holders iRacing.

Keep up with all of our latest coverage of Motorsport Games, here.