DEFR14A: ESS Tech Seeks Stockholder Approval for Reverse Stock Split to Maintain NYSE Listing

ESS Tech is asking stockholders to approve a reverse stock split and a reduction in authorized shares to maintain its listing on the New York Stock Exchange.

Summary

• ESS Tech, Inc. is seeking stockholder approval for a reverse stock split of its common stock at a ratio ranging from 1-for-8 to 1-for-25.
• The company also proposes to reduce the authorized number of common stock shares from 2,000,000,000 to 1,000,000,000.
• The special meeting to vote on this proposal will be held virtually on August 23, 2024.
• The board of directors believes the reverse stock split is necessary to maintain its listing on the NYSE, as the company received a notice of non-compliance due to its stock price falling below $1.00.
• The board reserves the right to abandon the reverse stock split if it's no longer in the company's best interest.
• If approved, the reverse stock split would be implemented at the discretion of the board before the one year anniversary of the special meeting.
• The record date for stockholders eligible to vote at the special meeting was July 25, 2024.
• The Notice of Internet Availability of Proxy Materials was first sent on or about August 8, 2024.
• The board recommends voting FOR the reverse stock split proposal.

Sentiment

Score: 6

Explanation: The document is primarily informational, outlining the proposed reverse stock split and its potential effects. While the goal is positive (maintaining NYSE listing), there are acknowledged risks and uncertainties, resulting in a neutral to slightly positive sentiment.

Positives

• The reverse stock split aims to maintain the company's listing on the NYSE, which could improve marketability and liquidity of the common stock.
• A higher stock price may attract a broader range of institutional and other investors.
• The reduction in authorized shares could reduce certain costs for the company.
• The board of directors believes that after the Authorized Share Reduction, the number of shares of common stock available for future issuance is sufficient for current anticipated future needs.

Negatives

• There is no guarantee that the reverse stock split will increase the stock price or maintain it at a desired level.
• The reverse stock split may reduce the liquidity of the common stock and result in higher transaction costs.
• The market price of a company's shares may decline after a reverse stock split.
• The total market capitalization of the company after the Reverse Stock Split may be lower than the total market capitalization before the Reverse Stock Split.

Risks

• The reverse stock split may not achieve its intended benefits, and the stock price could decrease due to factors unrelated to the split.
• Delisting from the NYSE could adversely affect the liquidity of the company's common stock and warrants.
• Delisting would also constitute an event of default under certain of our debt instruments, which would require us to expend cash to repay debt or replace letters of credit.
• Delisting could cause other adverse consequences, such as difficulties in raising capital and in providing stock-based incentives to attract and retain personnel.

Future Outlook

The company intends to continue monitoring the closing bid price for its common stock and assess potential actions to regain compliance with the NYSE listing rule. The board of directors reserves the right to change the company's dividend policy in the future, but does not currently anticipate that the reverse stock split will result in a change to the company's dividend policy.

Management Comments

• On behalf of our board of directors, we would like to express our appreciation for your continued support of and interest in ESS.
• The board of directors believes that the Reverse Stock Split is a potentially effective means for us to increase the per share market price of our common stock and to avoid, or at least mitigate, the likely adverse consequences of our common stock being delisted from the NYSE by producing the immediate effect of increasing the bid price of our common stock.

Industry Context

Reverse stock splits are a relatively common strategy for companies facing delisting from major exchanges due to low stock prices. Other companies in similar situations may consider or have implemented similar measures. The success of a reverse stock split depends on various factors, including the company's underlying financial performance and market conditions.

Comparison to Industry Standards

• Many companies facing potential delisting from exchanges like the NYSE or NASDAQ have implemented reverse stock splits to regain compliance with minimum share price requirements.
• For example, companies in the energy sector or technology industry facing similar challenges have used reverse stock splits to improve their stock price and appeal to a broader range of investors.
• The effectiveness of a reverse stock split varies, with some companies experiencing a sustained increase in share price while others see only a temporary effect or further decline.

Stakeholder Impact

• Shareholders will be impacted by the reverse stock split, potentially seeing a change in the number of shares they own and the per-share price.
• Employees may be affected by the company's ability to attract and retain personnel, which could be influenced by the stock price and exchange listing.
• The company's ability to raise capital could be affected by its stock price and exchange listing, impacting its operations and growth.

Next Steps

• Stockholders will vote on the reverse stock split proposal at the special meeting on August 23, 2024.
• If approved, the board of directors will determine whether and when to implement the reverse stock split and at what ratio.
• The company will file an amendment to its certificate of incorporation to effect the reverse stock split, if implemented.

Key Dates

Keywords

reverse stock split, authorized shares, NYSE listing, proxy statement, common stock, stockholders, ESS Tech