DEF: Fly-E Group Seeks Shareholder Approval for Reverse Stock Split

Fly-E Group, Inc. will hold a special meeting on September 15, 2025, to vote on a reverse stock split aimed at maintaining its Nasdaq listing.

Summary

• A Special Meeting of Stockholders is scheduled for September 15, 2025, at 10:00 a.m. Eastern Time, to be held virtually.
• Stockholders will vote on a proposal to amend the company's charter to effect a reverse stock split of common stock by a ratio in the range of 1-for-2 to 1-for-20.
• The Board of Directors will determine the exact ratio and timing of the reverse split, if implemented, within one year after the conclusion of the Special Meeting.
• A second proposal is to consider and vote upon a proposal to adjourn the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies.
• The primary purpose of the reverse stock split is to increase the per-share price of common stock to comply with Nasdaq Listing Rule 5550(a)(2), which requires a minimum closing bid price of $1.00 per share.
• Maintaining the Nasdaq listing is considered crucial for the marketability, liquidity, and overall credibility of the company's common stock, as well as for facilitating future financings.
• As of the record date, August 27, 2025, there were 18,897,030 shares of common stock outstanding and entitled to vote.
• The Board unanimously recommends voting FOR both the Reverse Split Proposal and the Adjournment Proposal.
• If the reverse split is approved and implemented, the number of outstanding shares would be reduced, for example, to approximately 9,448,515 shares for a 1-for-2 split or 944,851 shares for a 1-for-20 split, without giving effect to rounding for fractional shares.
• Fractional shares resulting from the reverse split will be rounded up to the nearest whole share, and no cash will be issued in lieu of fractional shares.

Sentiment

Score: 5

Explanation: The filing addresses a critical compliance issue (Nasdaq listing) which is a necessary step to avoid delisting. However, a reverse stock split is often viewed negatively by the market as it signals a low stock price and does not fundamentally improve the company's business. The risks associated with the split not achieving its intended benefits are clearly stated. It's a necessary action but not inherently positive for underlying value.

Positives

• Maintaining Nasdaq listing could significantly improve the marketability and liquidity of common stock by avoiding delisting.
• A higher stock price may attract institutional investors and brokerage firms that often have policies discouraging investment in lower-priced securities.
• Continued listing on Nasdaq provides overall credibility to an investment in the company's common stock due to stringent listing and disclosure requirements.
• The reverse split, if successful, could help facilitate future financings and give management more flexibility to focus on executing business strategy.

Negatives

• There is no assurance that the proposed reverse split will increase the per-share price of common stock proportionally or that any such increase will be sustained.
• The market price of common stock may decrease due to factors unrelated to the reverse split, including future performance.
• The company may not satisfy Nasdaq continued listing requirements even after the reverse split, especially if another reverse split is needed within a short period, potentially triggering Rule 5810(c)(3)(A)(iv).
• The reverse split could decrease the liquidity of common stock due to the reduced number of shares outstanding.
• Stockholders owning odd lots (fewer than 100 shares) may find it more difficult to sell their shares and incur higher brokerage commissions.
• Failure to approve the Reverse Split Proposal would likely result in the common stock being delisted by Nasdaq, which could hinder financing and materially adversely affect business operations.

Risks

• The reverse stock split may not result in the intended increase in the market price of common stock, or any increase may not be proportional to the split ratio.
• There is a risk that the company may not satisfy Nasdaq continued listing requirements even after the reverse split, potentially leading to delisting.
• Delisting from Nasdaq could adversely affect the liquidity and market price of common stock, reduce the number of investors willing to hold or acquire shares, and negatively impact the ability to access equity markets and obtain additional financing.
• The proposed reverse split may decrease the liquidity of common stock due to the reduced number of shares outstanding, particularly if the stock price does not increase.
• Transaction costs for investors, especially those with odd lots (fewer than 100 shares), may be higher after the reverse split.
• Nasdaq Listing Rule 5810(c)(3)(A)(iv) imposes stricter compliance conditions for companies that fail to meet minimum bid price requirements after recent reverse stock splits, potentially limiting future compliance periods.

Future Outlook

The company anticipates that the reverse stock split, if approved and implemented, will increase its per-share price, enabling it to maintain its listing on The Nasdaq Capital Market. This action is expected to potentially improve the marketability and liquidity of its common stock by attracting a broader range of investors. However, the company cannot assure that these intended benefits will be realized, or that the stock price will not decline due to other factors.

Management Comments

• "The Board believes that effecting the Reverse Split would, among other things, help the Company to (1) increase the per share price of our common stock, (2) maintain the listing of our common stock on Nasdaq, and (3) potentially improve the marketability and liquidity of our common stock."
• "Our Board believes that the Reverse Split is an effective means for the Company to maintain compliance with the rules of Nasdaq and to avoid, or at least mitigate, the likely adverse consequences of our common stock being delisted from The Nasdaq Capital Market by producing the immediate effect of increasing the bid price of our common stock."
• "Our Board believes that continued listing on Nasdaq provides overall credibility to an investment in our common stock, given the stringent listing and disclosure requirements of Nasdaq."
• "The Board considered all of the foregoing factors and determined that seeking stockholder approval for the Reverse Split Proposal is in the best interests of the Company and the stockholders."

Industry Context

The proposed reverse stock split by Fly-E Group, Inc. is a common strategic maneuver for companies whose stock price has fallen below the minimum bid price requirements of major exchanges like Nasdaq. This action is typically undertaken to avoid delisting, which can severely restrict a company's access to capital markets, reduce its visibility, and deter institutional investors. Many companies in similar situations have pursued reverse splits to regain compliance and maintain the perceived prestige and liquidity associated with a national exchange listing, positioning themselves more favorably against competitors that maintain such listings.

Comparison to Industry Standards

• The proposed reverse stock split ratio range of 1-for-2 to 1-for-20 is consistent with similar actions taken by other companies to regain compliance with Nasdaq's minimum bid price rule (e.g., Rule 5550(a)(2)). For instance, companies like Sundial Growers (now SNDL Inc.) and Ideanomics (IDEX) have executed reverse splits within comparable ranges to maintain their exchange listings.
• The stated risks, such as the uncertainty of sustained price increase and potential for continued non-compliance, are common disclaimers in reverse split proposals across the industry, reflecting the inherent market volatility and the fact that a reverse split is a structural, not operational, change.
• The company's emphasis on maintaining Nasdaq listing for improved marketability, liquidity, and access to capital aligns with the broader industry view that national exchange listings are critical for attracting institutional investment and facilitating future financing rounds, a benchmark for many publicly traded entities.

Corporate Governance

Stakeholder Impact

• **Shareholders**: Potential for increased stock price and maintained Nasdaq listing, which could improve liquidity and marketability. However, there is a risk that the split may not achieve its intended goals, potentially leading to further price decline or delisting. Fractional shares will be rounded up, resulting in minor adjustments to proportional ownership.
• **Employees**: Equity compensation arrangements, such as stock options and restricted shares, will be proportionately adjusted to reflect the reverse split, ensuring their intrinsic value is maintained.
• **Potential Investors**: A higher stock price resulting from the reverse split may make the company more attractive to institutional investors and brokerage firms that have internal policies against investing in lower-priced stocks, potentially broadening the investor base.

Next Steps

• Stockholders are encouraged to vote on the Reverse Split Proposal and Adjournment Proposal at the Special Meeting on September 15, 2025.
• If the Reverse Split Proposal is approved, the Board of Directors will determine, in its sole discretion, whether to implement the reverse stock split, its specific ratio (within the 1-for-2 to 1-for-20 range), and the effective date within one year after the conclusion of the Special Meeting.
• The company will file a current report on Form 8-K with the SEC within four business days of the Special Meeting to announce the final voting results.

Key Dates

Recommendation

The proposed reverse stock split is a critical defensive measure to maintain the company's Nasdaq listing, which is essential for market access and investor confidence. While necessary, a reverse split does not address underlying business fundamentals and often signals past stock price weakness. The market's reaction to reverse splits can be mixed, and there's no guarantee of sustained price appreciation. Investors should hold to observe the company's operational performance post-split and its ability to leverage the maintained listing for long-term value creation, rather than speculating on short-term price movements from the split itself.

Keywords

Fly-E Group, Reverse Stock Split, Nasdaq Listing, FLYE, Proxy Statement, Corporate Governance, Shareholder Meeting, Stock Price, Delisting Risk, Equity Market Access