DEF: Noodles & Co. Seeks Reverse Stock Split to Avoid Nasdaq Delisting

Noodles & Company is seeking stockholder approval for a reverse stock split to boost its share price and maintain its Nasdaq listing after receiving a delisting notification.

Summary

• A Special Meeting of stockholders will be held on February 4, 2026, at 1:00 p.m. Eastern Time, to vote on a Reverse Stock Split Proposal.
• The Board of Directors unanimously recommends approving an amendment to the Company's Charter to effect a reverse stock split of Class A common stock by a ratio in a range of 1-for-2 to 1-for-15.
• The Board will have the discretion to determine the exact ratio and the effective time and date of the reverse split, if at all, within one year after the conclusion of the Special Meeting.
• The primary purpose of the reverse split is to increase the per-share price of Class A common stock to regain compliance with The Nasdaq Global Select Market's Minimum Bid Price Requirement of $1.00 per share.
• Noodles & Company received a notification letter from Nasdaq on June 24, 2025, for non-compliance with the Minimum Bid Price Requirement and expects to receive a formal delisting notice by December 22, 2025.
• Approval of the Reverse Split Proposal requires the affirmative vote of the holders of 66 2/3% of the issued and outstanding shares of Class A common stock entitled to vote.

Sentiment

Score: 3

Explanation: The company is in a precarious position, facing an imminent delisting from Nasdaq due to its failure to meet the minimum bid price requirement, which is a significant negative indicator. While the proposed reverse stock split is a necessary defensive measure to maintain listing, it does not inherently improve the company's operational or financial performance. The outcome of the strategic alternatives review is uncertain, and the reverse split itself carries risks, including no guarantee of sustained price increase or improved liquidity.

Positives

• Aims to maintain the listing of Class A common stock on The Nasdaq Global Select Market, preventing the adverse effects of delisting.
• Potential to improve the marketability and liquidity of Class A common stock by attracting a broader range of investors and increasing analyst interest.
• Could provide financial flexibility to raise additional capital through equity securities and facilitate strategic business transactions by increasing the number of authorized and unreserved shares.
• Stockholders who would otherwise receive fractional shares as a result of the reverse split will have their share amount rounded up to the nearest whole share.

Negatives

• The Company received a Nasdaq Notice on June 24, 2025, indicating non-compliance with the $1.00 Minimum Bid Price Requirement.
• The Company will not regain compliance by the December 22, 2025, deadline and expects to receive a formal delisting notice from Nasdaq.
• There is no assurance that the reverse split will increase the stock price proportionally or that any such increase will be sustained or attract new investors.
• The reverse split may decrease the liquidity of Class A common stock due to a reduced number of outstanding shares.
• Stockholders owning 'odd lots' (fewer than 100 shares) after the split may face higher brokerage commissions and transaction costs.
• The effective increase in the authorized number of shares of Class A common stock available for issuance could have anti-takeover implications.

Risks

• The reverse split may not increase the price of Class A common stock proportionally, and the price may decrease due to factors unrelated to the split.
• There is no assurance that the Company will satisfy Nasdaq continued listing requirements even after the reverse split, potentially leading to delisting.
• The proposed reverse split may decrease the liquidity of Class A common stock and result in higher transaction costs for stockholders, particularly those with odd lots.
• The increase in authorized shares could be used to oppose hostile takeover attempts or delay changes in control, which might prevent stockholders from receiving a premium for their shares.
• Delisting from Nasdaq could reduce liquidity and market price, limit access to equity markets, affect the ability to provide equity incentives, and negatively impact the Company's reputation and business operations.

Future Outlook

The Board initiated a review of strategic alternatives on September 3, 2025, to explore ways to maximize stockholder value. This review includes a range of potential options such as refinancing existing indebtedness, refranchising or selling all or part of the business, and/or other strategic or financial transactions. Future financing transactions, if pursued, could involve the issuance of securities, which might be dilutive to stockholders. The Board reserves the right to abandon the Reverse Split Proposal even if approved by stockholders.

Management Comments

• "You are cordially invited to attend a special meeting of stockholders... The enclosed Notice of Special Meeting and Proxy Statement describe the business to be transacted at the Special Meeting." Joseph Christina, Chief Executive Officer.
• "Your vote is very important to us. Whether or not you plan to attend the Special Meeting, please ensure your shares are represented by voting promptly." Joseph Christina, Chief Executive Officer.
• "The Board unanimously recommends that you vote your shares FOR the approval of the Reverse Split Proposal."
• "The Board believes that effecting the Reverse Split would, among other things, help the Company to (1) increase the per share price of our Class A common stock, (2) maintain the listing of our Class A common stock on The Nasdaq Global Select Market, and (3) potentially improve the marketability and liquidity of our Class A common stock."

Industry Context

The necessity for a reverse stock split highlights a common challenge faced by publicly traded companies whose stock price falls below major exchange minimums. Maintaining a listing on a national exchange like Nasdaq is critical for a company's credibility, access to capital markets, and investor liquidity, as delisting to less efficient over-the-counter markets can significantly deter institutional and individual investors who often have policies against holding lower-priced or unlisted securities.

Corporate Governance

Stakeholder Impact

• **Shareholders:** Potential for increased per-share price and maintained Nasdaq listing, but also risks of decreased liquidity, higher transaction costs for odd lots, and potential dilution from future capital raises. Fractional shares will be rounded up.
• **Employees:** Equity compensation arrangements (stock options, restricted stock units, performance stock units) will be proportionately adjusted, including exercise prices and the number of shares issuable.
• **Investors (general):** Delisting could make it less convenient to sell or buy shares, and many investors may avoid unlisted securities. Maintaining Nasdaq listing is crucial for broader investor appeal and market access.

Next Steps

• Stockholders are to vote on the Reverse Split Proposal at the Special Meeting on February 4, 2026.
• The Board will decide, within one year after the Special Meeting, whether to implement the reverse split and at what specific ratio (within the 1-for-2 to 1-for-15 range).
• The Company intends to appeal any Nasdaq delisting determination by requesting a hearing with the Nasdaq Hearing Panel, including a request for an extension of the Compliance Period.
• The Board's review of strategic alternatives, which includes potential refinancing, refranchising, or sale of the business, remains in process.

Key Dates

Keywords

Reverse Stock Split, Nasdaq Delisting, NDLS, Proxy Statement, Corporate Governance, Stock Market Compliance, Shareholder Meeting, Capital Structure, Equity Markets, Noodles & Company