DEF 14C: FiscalNote Board Eyes Reverse Stock Split to Boost NYSE Listing

FiscalNote Holdings, Inc. stockholders approved a reverse stock split proposal, granting the Board discretion to implement it to maintain NYSE listing compliance.

Summary

• Consenting stockholders, representing approximately 66.9% of the total voting power, approved a resolution authorizing the Board of Directors to effect a reverse stock split.
• The Board has the discretion to implement a reverse stock split at a ratio between 1-for-2 and 1-for-15, with the exact ratio to be determined by the Board, until October 10, 2025.
• The primary purpose of the reverse stock split is to raise the per share trading price of the Class A Common Stock to regain compliance with the New York Stock Exchange's (NYSE) $1.00 minimum bid price listing criteria.
• FiscalNote received a notification from the NYSE on April 10, 2025, indicating non-compliance because the average closing price of its Class A Common Stock was less than $1.00 over a consecutive 30 trading-day period.
• If implemented, the reverse stock split would decrease the total number of outstanding shares and is expected to proportionately increase the market price of the Class A Common Stock.
• No fractional shares will be issued; stockholders who would otherwise receive fractional shares will be entitled to receive cash in lieu thereof.
• The reverse stock split will not affect stockholders' respective percentage ownership in the Company, except for adjustments due to fractional shares.
• The number of authorized shares of common stock will not be reduced, effectively increasing the number of shares available for future issuance.
• Outstanding stock awards, option awards, warrants, and convertible notes will be proportionately adjusted in terms of shares issuable and exercise/conversion prices.

Sentiment

Score: 5

Explanation: The filing addresses a critical issue (NYSE delisting risk) with a standard corporate action (reverse stock split). While it aims to resolve a negative situation, the outcome is uncertain, and there are acknowledged risks associated with reverse splits, leading to a neutral-to-slightly-positive sentiment for addressing the immediate problem, but not necessarily for overall company performance.

Positives

• Aims to maintain the company's listing on the NYSE, preventing potential delisting which could adversely affect its ability to raise additional financing and the liquidity of its Class A Common Stock.
• May increase the attractiveness of the Class A Common Stock to institutional investors and brokerage houses that have policies against investing in low-priced stocks.
• Could potentially increase the market price of the Class A Common Stock, improving its perception in the market.

Negatives

• There is no assurance that the price per share of Class A Common Stock after the reverse stock split will be maintained for any period of time or that it will achieve the desired results, including maintaining NYSE compliance.
• Some investors may view a reverse stock split negatively, which could adversely impact the market price of the common stock.
• Implementation of the reverse stock split may lead to reduced trading volume, increased sales by retail investors, and/or a smaller number of market makers, thereby decreasing liquidity.
• Stockholders who own less than one hundred shares (an odd lot transaction) following the reverse stock split may incur incrementally higher trading costs through certain brokers.

Risks

• The effect of the reverse stock split on the market price for Class A Common Stock cannot be accurately predicted, and there is no assurance the price will be maintained.
• The reverse stock split may not achieve the desired result of maintaining compliance with the continued listing requirements of the NYSE.
• Negative investor perception of reverse stock splits could adversely impact the market price of common stock.
• Reduced number of shares outstanding after the split may lead to decreased trading, increased sales by retail investors, and fewer market makers, decreasing liquidity.
• Stockholders owning less than one hundred shares post-split may face higher trading costs for odd lot transactions.
• Delisting from the NYSE could adversely affect the company's ability to raise additional financing, the ability of investors to trade securities, and the value and liquidity of Class A Common Stock.
• Delisting may also lead to other negative impacts, including potential loss of employee confidence, loss of institutional investors, or reduced interest in business development opportunities.
• The increase in authorized but unissued shares could have an anti-takeover effect by diluting stock ownership or voting rights.

Future Outlook

The company anticipates that implementing a reverse stock split will raise its per share trading price to regain compliance with NYSE listing requirements and enhance its appeal to institutional investors. However, there is no assurance that the increased price will be maintained or that the desired results will be achieved, and the Board retains discretion to abandon the plan based on its determination of the company's best interests.

Management Comments

• The Board believes that the reverse stock split is an effective means for us to regain compliance with the Listing Rule.
• We understand that many brokerage houses and institutional investors have internal policies and practices that either may prohibit them from investing in low-priced stocks or may tend to discourage individual brokers from recommending low-priced stocks to their customers.
• The Board does not intend for the reverse stock split to be the first step in a series of plans or proposals of a going private transaction within the meaning of Rule 13e-3 of the Exchange Act.

Industry Context

Companies often undertake reverse stock splits to meet exchange listing requirements, particularly minimum bid price rules, to avoid delisting. This is a common strategy for companies whose stock price has fallen below critical thresholds, aiming to improve market perception and liquidity, although the long-term effectiveness and market reaction can vary across the industry.

Corporate Governance

Stakeholder Impact

• **Shareholders:** Will own a reduced number of shares but maintain the same percentage ownership (except for fractional shares). May face higher trading costs for odd lot transactions. Potential for increased stock price and maintained NYSE listing, but also risks of negative market perception and decreased liquidity.
• **Employees:** Potential loss of employee confidence if delisting occurs, which the reverse split aims to prevent.
• **Institutional Investors:** A higher stock price may make the company more attractive to institutional investors and brokerage houses with internal policies against low-priced stocks.

Next Steps

• The Board will determine the exact ratio for the reverse stock split within the approved range of 1-for-2 to 1-for-15.
• The Board will decide whether to implement the reverse stock split based on various factors, including market conditions and NYSE requirements, with a deadline of October 10, 2025.
• If the Board elects to proceed, the company will issue a press release at least three business days in advance of the Reverse Stock Split Effective Time, announcing the final ratio and effective time.
• Within four business days following the Reverse Stock Split Effective Time, the company will file a Current Report on Form 8-K.
• The transfer agent will notify stockholders of record and send statements of ownership for post-split shares, including cash payments for fractional shares if applicable.

Key Dates

Recommendation

The proposed reverse stock split is a necessary defensive action to maintain NYSE listing compliance, addressing a critical risk. While it aims to improve market perception and liquidity, the filing explicitly states that the outcome on stock price and liquidity is uncertain, and negative investor sentiment towards reverse splits is a known risk. The Board's discretion to implement or abandon the split adds a layer of uncertainty. Given the immediate need to address the listing issue, it's a prudent step, but it doesn't fundamentally change the company's underlying business prospects or financial health as presented in this filing. Therefore, a 'hold' recommendation is appropriate, awaiting further operational or financial updates that could signal a stronger turnaround or sustained growth.

Keywords

FiscalNote Holdings, Reverse Stock Split, NYSE Listing, Stock Market Compliance, Corporate Governance, Shareholder Approval, FN, Class A Common Stock, Class B Common Stock, SEC Filing