Swvl, the Dubai-headquartered firm, has announced a reverse stock split that grants each shareholder 25 shares for each share held. The move was a response to Nasdaq’s second delisting warning means after Swvl’s stock price sank to 17 cents ($0.17). Due to the reverse split, Swvl’s share price jumped to $4.18 at when trading opened today.
In a press statement seen by TechCabal, Swvl said it hoped the “reverse Share Split will allow the Company to regain compliance with the Nasdaq $1.00 minimum bid price requirement.”
A reverse stock split allows publicly traded firms to consolidate existing shares by issuing more outstanding shares to shareholders for free. It doesn’t change anything though.
It’s like cutting more slices into a pie. The size of the pie doesn’t change; there are just more pieces—which will be given for free to existing shareholders. Despite the reverse stock, Swvl’s market capitalisation is essentially unchanged.
Since the reverse stock split which saw Swvl stock trade at a high of $4.14, shares fell to $3.83 within a few hours of trading. Swvl now has to keep the price from falling below $0.37 for 10 consecutive days between now and July 10, 2023, to comply with Nasdaq listing rules.
Swvl’s balance sheet is still in the red. The company has $24.30 million in cash and $6.18 million in debt, giving a net cash position of $18.12 million or $0.13 per share–reverse stock split notwithstanding.
Yesterday, we reported on Swvl’s unwinding of its $40 million acquisition of Volt Lines, a Turkish transportation-as-a-service company. Ali Halabi, CEO of Volt Lines told Wamda that the deal had to be revoked because SWVL’s current market cap was below the acquisition price of Volt Lines.
Swvl was only obligated to pay $5 million in cash for Volt Lines (within 6 months of the deal closing). The balance was to be settled by issuing 1.4 million Swvl shares in four revenue-based milestone tranches. Swvl could not follow through as the value of its shares had sunk beneath $40 million before the deal could be completed.