DEF: LivePerson Seeks Reverse Stock Split, Share Increase to Avoid Delisting

LivePerson, Inc. is calling a Special Meeting to vote on a reverse stock split to regain Nasdaq compliance and an increase in authorized common stock to convert Series B Preferred Stock, stemming from a recent debt exchange.

Summary

• Stockholders will vote on two proposals at a Special Meeting on October 2, 2025: a reverse stock split and an increase in authorized common stock.
• The Reverse Stock Split Proposal aims to combine common stock at a ratio of 1-for-5 to 1-for-20, at the Board's discretion, to raise the per-share trading price and regain compliance with Nasdaq's $1.00 minimum bid price requirement.
• LivePerson received a Nasdaq notice on May 1, 2025, for non-compliance and has until October 28, 2025, to meet the minimum bid price.
• The Authorized Common Stock Increase Proposal seeks to increase authorized common stock by a factor of 1.5x to allow for the conversion of 26,551 shares of Series B Fixed Rate Convertible Perpetual Preferred Stock into 23,217,594 shares of common stock.
• This conversion is a result of a privately negotiated exchange on September 12, 2025, where $341.1 million of 0% Convertible Senior Notes due 2026 were exchanged for cash, new debt, common stock, and Series B Preferred Stock.
• The Board of Directors unanimously recommends a 'FOR' vote on both proposals.
• Noteholders and certain executive officers, collectively holding approximately 42.9% of the total voting power, have agreed to vote in favor of both proposals.

Sentiment

Score: 3

Explanation: The filing addresses critical issues (Nasdaq delisting risk, preferred stock conversion from debt restructuring) that stem from underlying financial challenges. While the proposed actions are necessary to mitigate these risks, they are reactive and indicate a difficult operating environment, leading to a negative sentiment.

Positives

• The proposed reverse stock split is a necessary step to regain compliance with Nasdaq's minimum bid price requirement, preventing potential delisting.
• An increased stock price may attract broader investor interest, including institutional investors and brokerage firms that avoid low-priced stocks.
• Approval of the authorized common stock increase facilitates the conversion of Series B Preferred Stock, which carries a 15.0% annual dividend (increasing to 20.0% after September 12, 2026) and senior liquidation preference, reducing ongoing preferred stock obligations.
• The company is proactively addressing capital structure issues and regulatory compliance.

Negatives

• The need for a reverse stock split indicates the common stock's trading price has fallen significantly, reflecting underlying business challenges.
• There is no assurance that the reverse stock split will sustainably increase the stock price or improve liquidity, and it could be viewed negatively by the market.
• The conversion of Series B Preferred Stock will result in significant dilution to existing common stockholders, with 23,217,594 new shares being issued.
• If the authorized common stock increase is not approved, the Series B Preferred Stock will remain outstanding, continuing to accrue high dividends and maintaining its senior position over common stock for dividends and liquidation.

Risks

• The reverse stock split may not increase the per-share trading price proportionally or sustainably, potentially leading to further price declines.
• The reverse stock split could decrease the liquidity of common stock and increase transaction costs for stockholders holding odd lots.
• The market may view the reverse stock split negatively, potentially leading to a decrease in overall market capitalization.
• The issuance of common stock from the Series B Preferred Stock conversion will significantly dilute existing stockholders' ownership and voting power.
• Future sales of the newly converted common stock could negatively impact the market price of the common stock.
• If the authorized common stock increase is not approved, the Series B Preferred Stock will continue to accrue dividends (increasing to 20.0% after September 12, 2026) and maintain its senior rights, potentially restricting common stock dividends.

Future Outlook

The company anticipates that the reverse stock split will increase the per-share trading price of its common stock, potentially encouraging investor interest and improving marketability. However, it provides no assurance that these actions will regain Nasdaq compliance, stabilize the market price, improve liquidity, or prevent future non-compliance, as other factors like financial results and market conditions can adversely affect the stock price.

Management Comments

• "The Board of Directors recommends a vote FOR each of the Company's proposals listed as Proposals Nos. 1 and 2."
• "Our Board has determined that it is in the best interests of the Company and its stockholders to have the ability to combine our shares of common stock within the Ratio Range... in order to raise the per share trading price of our common stock."
• "The Board believes that the anticipated higher market price resulting from a reverse stock split would enable institutional investors and brokerage firms with policies and practices such as those described above to invest in our common stock."

Industry Context

The need for a reverse stock split is a common measure taken by companies facing potential delisting from major exchanges like Nasdaq due to a sustained low share price. This often signals underlying financial or operational challenges. The associated increase in authorized shares and conversion of preferred stock are part of a broader capital restructuring, frequently observed when companies are managing significant debt obligations or seeking to optimize their capital structure under pressure.

Corporate Governance

Related Party Transactions

• Noteholders (including entities affiliated with Linden Advisors LP, Davidson Kempner Capital Management LP, Tenor Opportunity Master Fund, Ltd., Silverback Asset Management, Opti Capital Management, LP, and Calamos Advisors LLC) and certain executive officers have agreed to vote their shares (representing approximately 42.9% of total voting power) in favor of both the Reverse Stock Split Proposal and the Authorized Common Stock Increase Proposal.

Stakeholder Impact

• **Common Stockholders:** Will experience a reduction in the number of shares held due to the reverse stock split, potential cash payment for fractional shares, and significant dilution from the conversion of Series B Preferred Stock. Voting power percentage will remain largely unchanged post-split (excluding fractional shares), but will be diluted by the preferred stock conversion.
• **Series B Preferred Stockholders (Noteholders):** If the Authorized Common Stock Increase is approved, their preferred shares will convert into common stock. If not approved, they retain preferred stock with increasing dividend rates and enhanced liquidation preferences, senior to common stockholders.
• **Employees with Equity Awards:** Stock options, RSUs, and ESPP shares will be proportionately adjusted for the reverse stock split, including the number of shares and exercise/purchase prices.
• **Convertible Noteholders (2026 & 2029 Notes):** The conversion rates for their notes will be decreased proportionally by the reverse stock split ratio.

Next Steps

• Stockholders will vote on the Reverse Stock Split Proposal and the Authorized Common Stock Increase Proposal at the Special Meeting on October 2, 2025.
• If approved, the Board will determine the exact ratio for the reverse stock split (between 1-for-5 and 1-for-20) and the timing within one year of stockholder approval.
• If approved, the company will file the necessary Certificate of Amendment with the Delaware Secretary of State to effect the reverse stock split and the authorized common stock increase.
• If the Authorized Common Stock Increase Proposal is approved, the Series B Preferred Stock will convert into 23,217,594 shares of common stock within one business day of the filing's acceptance.
• The company aims to regain Nasdaq compliance by October 28, 2025, by maintaining a closing bid price of $1.00 or more for at least 10 consecutive business days.

Key Dates

Recommendation

The company is addressing critical issues, including potential Nasdaq delisting and the conversion of high-dividend preferred stock, which are essential for its continued market presence and financial stability. While the proposals involve significant dilution and are reactive to past challenges, their approval is crucial to avoid worse outcomes like delisting or increased preferred stock obligations. The situation warrants a cautious 'hold' as the company navigates these necessary restructuring steps.

Keywords

Reverse Stock Split, Authorized Shares Increase, Nasdaq Compliance, Delisting Risk, Series B Preferred Stock, Convertible Notes, Stockholder Meeting, Corporate Governance, Capital Structure, Dilution