8-K: MSP Recovery Faces Nasdaq Delisting, Secures New Funding

MSP Recovery, Inc. received a Nasdaq delisting notice, while simultaneously amending a $35.4 million promissory note with Nomura and securing a $0.5 million convertible note advance from Yorkville with a reduced floor price.

Summary

• MSP Recovery, Inc. (the Company) received a Staff Delisting Determination from Nasdaq on October 22, 2025, with trading suspension effective October 31, 2025, due to non-compliance with the minimum stockholders' equity requirement.
• The Company's stockholders' deficit was $128.4 million as of December 31, 2024, significantly below the Nasdaq minimum of $2.5 million.
• The Company intends to request a review by a Nasdaq Hearings Panel by October 29, 2025, which would stay the delisting pending a decision.
• If delisted from Nasdaq, the Company expects its common stock to trade on the OTCQB Venture Market.
• On October 28, 2025, the Company and Yorkville agreed to reduce the Floor Price under their Standby Equity Purchase Agreement (SEPA) and convertible promissory notes from $1.00 to $0.50 per share.
• On October 24, 2025, the Company amended and restated a promissory note with Nomura, reflecting a current principal amount outstanding of approximately $35.4 million, with a maturity date of November 30, 2026, and an interest rate of 16.0% per annum.
• The Nomura amendment includes a limited waiver allowing the Company to use up to $3.0 million from Yorkville SEPA convertible note proceeds solely for operations, rather than for Nomura note repayment.
• On October 10, 2025, a second supplemental agreement to the Yorkville SEPA was made, allowing Yorkville to advance up to an additional $3.0 million in Convertible Promissory Notes to the Company.
• On October 28, 2025, Yorkville made an advance of $0.50 million principal under this agreement, resulting in net proceeds of $0.45 million to the Company after a 10% original issue discount.

Sentiment

Score: 2

Explanation: The imminent Nasdaq delisting due to a massive stockholders' deficit ($128.4M vs $2.5M required) is a severe negative. While some funding was secured, it comes with high interest rates and potentially significant dilution (reduced floor price), indicating a company in deep financial distress and struggling to meet basic listing requirements.

Positives

• Secured an additional $3.0 million in potential funding from Yorkville via convertible promissory notes, with an initial advance of $0.50 million (net $0.45 million).
• The limited waiver from Nomura allows the Company to use up to $3.0 million of Yorkville proceeds for operations, providing immediate liquidity for business needs.

Negatives

• Received a Staff Delisting Determination from Nasdaq, indicating imminent suspension of trading and removal from the Nasdaq Capital Market.
• The Company's stockholders' deficit of $128.4 million is substantially below Nasdaq's minimum requirement, highlighting significant financial distress.
• The reduction of the Yorkville SEPA Floor Price from $1.00 to $0.50 per share could lead to increased dilution for existing shareholders upon conversion of notes.
• The Nomura promissory note carries a high interest rate of 16.0% per annum, increasing to 18.0% upon default, indicating high borrowing costs.
• The Yorkville convertible note advance is subject to a 10% original issue discount, reducing the net proceeds received by the Company.
• The Company is under covenant to use commercially reasonable efforts to prepay the Nomura note in full within 90 days, which may be challenging given its financial position.
• The Company is restricted from declaring dividends or making distributions to equity holders while the Nomura note is outstanding.

Risks

• Delisting Risk: The Company faces imminent delisting from the Nasdaq Capital Market, which could reduce liquidity and investor interest in its stock.
• Appeal Uncertainty: There is no assurance that the Nasdaq Hearings Panel will grant the Company's request for continued listing.
• Trading Market Downgrade: If delisted, the Company's stock is expected to trade on the OTCQB Venture Market, which typically has lower liquidity and less stringent reporting requirements, potentially impacting investor confidence and stock price.
• Dilution Risk: The reduction of the Yorkville SEPA Floor Price to $0.50 per share increases the potential for significant shareholder dilution if convertible notes are exchanged into common stock at lower prices.
• High Debt Burden & Cost: The $35.4 million Nomura promissory note carries a high 16.0% annual interest rate, posing a substantial financial obligation and increasing the risk of default.
• Liquidity & Capital Raise Risk: The Company is obligated to seek additional capital to repay the Nomura note, and failure to do so could trigger an event of default.
• Operational Funding Dependency: The limited waiver from Nomura to use $3.0 million for operations highlights the Company's reliance on external funding for day-to-day activities.
• Covenant Breach Risk: Failure to comply with covenants in the Nomura note (e.g., timely prepayment, reporting on capital raise efforts, restrictions on other debt payments or dividends) could trigger an Event of Default.
• Market Value & Net Income Compliance: The Company failed to meet alternative Nasdaq compliance standards related to market value of listed securities ($35 million) or net income ($500,000), indicating underlying financial performance issues.

Future Outlook

The Company intends to timely request a review of the Nasdaq Delisting Notification by a Hearings Panel, hoping to secure continued listing. If delisted, the Company expects its common stock to trade on the OTCQB Venture Market. The Company is also committed to using commercially reasonable efforts to prepay the Nomura promissory note within 90 days of its issuance date and will provide monthly updates on its capital raise efforts.

Management Comments

• The Company intends to timely request a review of the Delisting Notification by the Panel.
• If the Company's Common Stock ceases to be listed for trading on the Nasdaq Capital Market, the Company expects that its Common Stock would continue to trade on the OTCQB Venture Market of the OTC Markets Group.
• The Company shall use its commercially reasonable efforts to prepay the Principal Amount in full within 90 days of the Issuance Date, and in any event as early as possible prior to the Maturity Date, including using its reasonable best efforts to raise additional capital necessary to repay all Note Obligations.

Industry Context

NA

Stakeholder Impact

• Shareholders: Face significant risk of delisting, potential loss of liquidity, and substantial dilution from convertible notes with a reduced floor price. The inability to pay dividends is also a negative.
• Creditors (Nomura, Yorkville): Nomura has secured a high interest rate and covenants for repayment, while Yorkville continues to provide funding, albeit with a lower conversion floor price, indicating their leverage.
• Employees: The use of $3.0 million from Yorkville proceeds for operations could help maintain employment and business continuity in the short term.

Next Steps

• The Company intends to request a review of the Nasdaq Delisting Notification by a Hearings Panel by October 29, 2025.
• If delisted from Nasdaq, the Company expects its common stock to trade on the OTCQB Venture Market.
• The Company is required to provide Nomura with a written update report on its capital raise efforts every 30 days after October 24, 2025.
• The Company is obligated to use commercially reasonable efforts to prepay the Nomura promissory note in full within 90 days of October 24, 2025.

Key Dates

Recommendation

The imminent delisting from Nasdaq due to a massive stockholders' deficit ($128.4 million vs. $2.5 million required) is a critical red flag, signaling severe financial distress and a high probability of reduced liquidity and investor confidence. While the company secured some convertible note funding, the terms (10% OID, reduced conversion floor price to $0.50) are highly dilutive, and the Nomura note carries an unsustainable 16% interest rate. The company's inability to meet basic listing requirements and its reliance on high-cost, dilutive financing, coupled with covenants requiring aggressive capital raises and restricting shareholder returns, points to a highly precarious financial position. Investors should consider exiting their positions.

Keywords

MSP Recovery, MSPR, Nasdaq Delisting, SEC Filing, 8-K, Yorkville SEPA, Convertible Notes, Nomura Promissory Note, Stockholders Deficit, Financial Distress, Capital Raise, Dilution, OTCQB, Corporate Governance, Risk Management