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Exela Technologies (XELA) Risk Analysis
Risk Overview Q3, 2024
Source: the company's latest filing for the period ended Sep 30, 2024, filed Nov 14, 2024
Risk Change Over Time
- Share Price & Shareholder Rights - Risk 1Our securities have been delisted from Nasdaq and experience the risks of trading in an over-the-counter market.
On November 6, 2024, we received written notification from Nasdaq that they would suspend trading of our common stock and Series B Cumulative Convertible Perpetual Preferred Stock (the "Series B Preferred Stock") (formerly Nasdaq: XELA and XELAP) on November 8, 2024, and a Form 25-NSE will be filed with the Securities and Exchange Commission (the "SEC") to delist such securities from Nasdaq. We will remain subject to SEC reporting obligations. As a result of the suspension and delisting, our common stock and Series B Preferred Stock began trading on the OTC Pink under the symbols "XELA" and "XELAP" on November 8, 2024, and such market is currently the only trading market for our securities. We anticipate that Nasdaq will soon file a Form 25-NSE with the SEC to formally remove the Company's securities from listing and registration on Nasdaq, although the exact timing of such filing is currently unknown.We can provide no assurance that our securities will continue to trade on OTC Pink, whether broker-dealers will continue to provide public quotes of our securities on OTC Pink, whether the trading volume of our securities on OTC Pink will be sufficient to provide for an efficient trading market or whether quotes for our securities will continue on OTC Pink in the future, which could result in significantly lower trading volumes and reduced liquidity for investors seeking to buy or sell our securities. In addition, we could face significant material adverse consequences, including limited availability of market quotations for our securities and a decreased ability to issue additional securities or obtain additional financing in addition to negative perceptions about us and our business that may result from delisting.
- Share Price & Shareholder Rights - Risk 2Item 2. Unregistered Sales of Equity Securities and Use of Proceeds, and Issuer Purchases of Equity Securities.
On August 10, 2022, the Board authorized a share buyback program (the "2022 Share Buyback Program"), pursuant to which the Company was authorized to repurchase, from time to time, up to 50,000 shares of the Common Stock over a two-year period through various means, including, open market transactions and privately negotiated transactions. The 2022 Share Buyback Program does not obligate the Company to repurchase any shares. The decision as to whether to repurchase any shares and the timing of repurchases will be based on the price of the Common Stock, general business and market conditions and other investment considerations and factors. No shares were repurchased under the 2022 Share Buyback Program during the nine months ended September 30, 2024. As of September 30, 2024, we had repurchased and concurrently retired a total of 1,787 shares of Common Stock pursuant to the 2022 Share Buyback Program. Share repurchase activity during the three months ended September 30, 2024 was as follows: ??????????? ? ?? Total Number Maximum???????of Shares?Number of???????Purchased as?Shares that???????Part of?May Yet Be????Average?Publicly?Purchased??Number?Price?Announced?Under the??of Shares?Paid per?Plans or?Plans orPeriod?Purchased?Share?Programs?ProgramsJuly 1, 2024-July 31, 2024? -?$ -? -? 48,213August 1, 2024-August 31, 2024? -?? -? -? 48,213September 1, 2024-September 30, 2024? -?$ -? -? 48,213Total? -????? ?
- Debt & Financing - Risk 3Item 3. Defaults Upon Senior Securities.
None.
Risk Highlights Q3, 2024
Risk Word Cloud
Risk Factors Full Breakdown - Total Risks 42
- Share Price & Shareholder Rights - Risk 1AddedOur securities have been delisted from Nasdaq and experience the risks of trading in an over-the-counter market.
On November 6, 2024, we received written notification from Nasdaq that they would suspend trading of our common stock and Series B Cumulative Convertible Perpetual Preferred Stock (the "Series B Preferred Stock") (formerly Nasdaq: XELA and XELAP) on November 8, 2024, and a Form 25-NSE will be filed with the Securities and Exchange Commission (the "SEC") to delist such securities from Nasdaq. We will remain subject to SEC reporting obligations. As a result of the suspension and delisting, our common stock and Series B Preferred Stock began trading on the OTC Pink under the symbols "XELA" and "XELAP" on November 8, 2024, and such market is currently the only trading market for our securities. We anticipate that Nasdaq will soon file a Form 25-NSE with the SEC to formally remove the Company's securities from listing and registration on Nasdaq, although the exact timing of such filing is currently unknown.We can provide no assurance that our securities will continue to trade on OTC Pink, whether broker-dealers will continue to provide public quotes of our securities on OTC Pink, whether the trading volume of our securities on OTC Pink will be sufficient to provide for an efficient trading market or whether quotes for our securities will continue on OTC Pink in the future, which could result in significantly lower trading volumes and reduced liquidity for investors seeking to buy or sell our securities. In addition, we could face significant material adverse consequences, including limited availability of market quotations for our securities and a decreased ability to issue additional securities or obtain additional financing in addition to negative perceptions about us and our business that may result from delisting.
- Share Price & Shareholder Rights - Risk 2AddedItem 2. Unregistered Sales of Equity Securities and Use of Proceeds, and Issuer Purchases of Equity Securities.
On August 10, 2022, the Board authorized a share buyback program (the "2022 Share Buyback Program"), pursuant to which the Company was authorized to repurchase, from time to time, up to 50,000 shares of the Common Stock over a two-year period through various means, including, open market transactions and privately negotiated transactions. The 2022 Share Buyback Program does not obligate the Company to repurchase any shares. The decision as to whether to repurchase any shares and the timing of repurchases will be based on the price of the Common Stock, general business and market conditions and other investment considerations and factors. No shares were repurchased under the 2022 Share Buyback Program during the nine months ended September 30, 2024. As of September 30, 2024, we had repurchased and concurrently retired a total of 1,787 shares of Common Stock pursuant to the 2022 Share Buyback Program. Share repurchase activity during the three months ended September 30, 2024 was as follows: ??????????? ? ?? Total Number Maximum???????of Shares?Number of???????Purchased as?Shares that???????Part of?May Yet Be????Average?Publicly?Purchased??Number?Price?Announced?Under the??of Shares?Paid per?Plans or?Plans orPeriod?Purchased?Share?Programs?ProgramsJuly 1, 2024-July 31, 2024? -?$ -? -? 48,213August 1, 2024-August 31, 2024? -?? -? -? 48,213September 1, 2024-September 30, 2024? -?$ -? -? 48,213Total? -????? ?
- Share Price & Shareholder Rights - Risk 3As a smaller reporting company, we are subject to scaled disclosure requirements that may make it more challenging for investors to analyze our results of operations and financial prospects and certain investors may find investing in our securities less attractive.
Currently, we are a "smaller reporting company," as defined by Rule 12b-2 of the Exchange Act. As a "smaller reporting company," we are able to provide simplified executive compensation disclosures in our filings and have certain other decreased disclosure obligations in our filings with the SEC, including being required to provide only two years of audited financial statements in annual reports. Consequently, it may be more challenging for investors to analyze our results of operations and financial prospects. Furthermore, we are a non-accelerated filer as defined by Rule 12b-2 of the Exchange Act, and, as such, are not required to provide an auditor attestation of management's assessment of internal control over financial reporting, which is generally required for SEC reporting companies under Section 404(b) of the Sarbanes-Oxley Act. Because we are not required to, and have not, had our auditor's provide an attestation of our management's assessment of internal control over financial reporting, a material weakness in internal controls may remain undetected for a longer period. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and their market price may be more volatile.
- Share Price & Shareholder Rights - Risk 4The HGM Group has significant influence over us and our corporate governance.
Our Executive Chairman, Par Chadha, our Interim Chief Financial Officer, Matthew Brown, our director, Ms. Sharon Chadha, and several of our other executives have or have had affiliations with the HGM Group. The HGM Group's interests may not align with the interests of our other stakeholders. The HGM Group is in the business of making investments in companies and may acquire and hold interests in businesses that compete directly or indirectly with us. The HGM Group may also pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us.
- Share Price & Shareholder Rights - Risk 5We substantially increased the outstanding number of shares during 2023, substantially diluting existing stockholders' interests in Exela, and we may engage in dilutive transactions in the future.
In 2023 we increased the outstanding shares of Common Stock from 1,393,276 at January 1, 2023 (adjusted to give effect for the 1:200 stock split on May 12, 2023) to 6,365,353 at December 31, 2023. The increase in outstanding shares was due principally to the sale of additional shares for cash, which resulted in all the shares of Common Stock outstanding on January 1, 2023 representing less than 22% of the outstanding shares of Common Stock on December 31, 2023. Due to the need to repay existing indebtedness and fund operations, we may issue a material number of additional shares of Common Stock in the future, which would have the effect of further diluting existing shareholders. Such issuances, or market perception of the possibility of substantial future dilution, could make our stock less attractive to investors and could have a material adverse effect on the price of our stock.
- Share Price & Shareholder Rights - Risk 6Our securities may be delisted from Nasdaq
Our Common Stock is currently listed for trading on the Nasdaq, and the continued listing of our Common Stock on the Nasdaq is subject to our compliance with a number of listing standards, including Nasdaq Listing Rule 5550(b)(2), which requires that the Company maintain a market value of listed securities ("MVLS") of at least $35 million (the "MVLS requirement") and Listing Rules 5620(a) and 5810(c)(2)(G), which require us to hold an annual shareholder meeting within twelve months of the December 31, 2022 fiscal year end (the "Annual Meeting Requirement"). On November 13, 2023, we received an anticipated notice (the "MVLS Notice") from Nasdaq notifying the Company that it is not in compliance with Nasdaq Listing Rule 5550(b)(2) because, for the last 30 consecutive business days, the Company's MVLS was below the minimum requirement of $35 million. In the MVLS Notice, Nasdaq indicated that the Company has 180 calendar days from the date of the MVLS Notice (or until May 13, 2024) to regain compliance with the MVLS Rule by having our MVLS close at or above $35 million for a minimum of ten consecutive business days. On March 14, 2023, we received a second notice stating that the Company is not in compliance with the Annual Meeting Requirement and that the Company had 45 calendar days, or until April 29, 2024, to submit a plan to regain compliance. There can be no assurance that we will remedy and continue to satisfy these and other continuing listing requirements and remain listed on the Nasdaq. If our Common Stock or Series B Preferred Stock were no longer listed on the Nasdaq, investors might only be able to trade on one of the over-the-counter markets. This would impair the liquidity of our securities not only in the number of shares that could be bought and sold at a given price, which might be depressed by the relative illiquidity, but also through delays in the timing of transactions and reduction in media and analyst coverage. In addition, we could face significant material adverse consequences, including limited availability of market quotations for our securities and a decreased ability to issue additional securities or obtain additional financing.
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