DEF 14A: Rallybio Proposes Reverse Stock Split for Nasdaq Compliance

Rallybio Corporation seeks stockholder approval for a reverse stock split to maintain its Nasdaq listing and enhance stock marketability.

Summary

• Stockholders are asked to approve an amendment to the Certificate of Incorporation to effect a reverse stock split of common stock.
• The proposed reverse stock split ratio will range from 1-for-5 shares up to 1-for-20 shares, with the exact ratio to be selected by the Board of Directors.
• The primary purpose is to regain and maintain compliance with Nasdaq's minimum bid price requirement of $1.00 per share, which the company failed to meet for 30 consecutive trading days starting January 8, 2025.
• Rallybio received a delisting determination letter from Nasdaq on February 24, 2025, and was granted an extension until February 23, 2026, to regain compliance.
• The reverse split is also intended to increase the per-share price, encourage investor interest, and improve the marketability and liquidity of the common stock, particularly for institutional investors and brokerage firms that may avoid low-priced stocks.
• As of December 19, 2025, there were 42,243,774 shares of common stock outstanding, and 56,414,206 shares outstanding on a fully diluted basis.
• The reverse stock split will uniformly affect all holders, reduce the number of outstanding shares, and proportionately adjust stock options, restricted stock units, and pre-funded warrants.
• No fractional shares will be issued; stockholders entitled to fractional shares will receive a cash payment based on the fair market value.
• The Board reserves the right to abandon the reverse stock split even if approved by stockholders.

Sentiment

Score: 3

Explanation: The necessity of a reverse stock split to avoid delisting from Nasdaq indicates underlying challenges with the company's stock performance. While the action itself is a prudent step for compliance and marketability, it does not reflect positive fundamental business developments.

Positives

• A successful reverse stock split is expected to help Rallybio regain and maintain compliance with Nasdaq's minimum bid price requirement, preventing delisting.
• An increased bid price could encourage broader investor interest and improve the marketability and liquidity of the common stock, potentially attracting institutional investors.
• The reverse split will result in additional authorized and unissued shares becoming available for general corporate purposes, including equity compensation plans, providing greater financial flexibility.

Negatives

• The need for a reverse stock split indicates that the company's common stock has traded below the Nasdaq minimum bid price of $1.00 for an extended period, signaling poor market performance.
• There is no guarantee that the reverse stock split will result in a permanent increase in the bid price of the common stock, as market price depends on performance and other factors.
• Stockholders who would receive fractional shares will receive a cash payment instead, which might be less desirable than holding a full share.

Risks

• The reverse stock split may not result in a permanent increase in the bid price of the common stock, as the market price is influenced by general economic, market, and industry conditions, as well as Rallybio's financial results and outlook.
• Even if the reverse stock split is effected, the expected benefits, such as improved marketability and liquidity, may not be realized or maintained.
• The Board reserves the right to abandon the reverse stock split even if stockholders approve it, which could lead to uncertainty or a failure to address the Nasdaq compliance issue.

Future Outlook

The company expects the reverse stock split to result in a higher price per share for its common stock, enabling it to maintain compliance with Nasdaq's continued listing requirements and potentially improving marketability and liquidity. However, it acknowledges that the expected benefits may not be realized or maintained, as the market price will continue to be based on performance and other factors. The Board retains the discretion to not implement the reverse stock split even if approved by stockholders.

Management Comments

• The Board believes it is in the best interest of the Company to approve the amendment to our Certificate of Incorporation to effect a reverse stock split to give the Company greater flexibility in considering and planning for future potential business needs.
• The Board also believes the amendment to our Certificate of Incorporation is necessary to ensure that we continue to satisfy the requirements for the continued listing of our common stock on the Nasdaq Capital Market.
• The Board recommends that you vote your shares FOR the approval of the Proposal to Effect a Reverse Stock Split.

Industry Context

Reverse stock splits are a common strategy employed by publicly traded companies to address low stock prices and maintain compliance with exchange listing requirements. Many brokerage firms and institutional investors have policies that discourage or prohibit investment in low-priced stocks, making a higher per-share price crucial for broader market appeal and liquidity. This action by Rallybio aligns with industry practices for companies facing similar challenges.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or results for direct comparison.
• The rationale for the reverse stock split (Nasdaq compliance, improved marketability for low-priced stocks) is a standard industry practice for companies facing similar challenges with their share price.

Corporate Governance

Stakeholder Impact

• Shareholders will own a proportionally smaller number of shares, but their percentage ownership interest in the company will remain the same.
• The per-share price is expected to increase, potentially improving the stock's appeal and liquidity for all shareholders.
• Holders of stock options, restricted stock units, and pre-funded warrants will see their holdings adjusted proportionately, maintaining the intrinsic value of their awards.
• Shareholders entitled to fractional shares will receive cash payments, which may be a minor inconvenience or a small benefit depending on individual circumstances.

Next Steps

• Stockholders will vote on the reverse stock split proposal at the Special Meeting on January 26, 2026.
• If approved, the Board will determine the exact reverse stock split ratio (between 1-for-5 and 1-for-20) and publicly announce it.
• The Certificate of Amendment will be filed with the Secretary of State of Delaware to effect the reverse stock split, with an anticipated effective time in February 2026.
• Final voting results will be discussed in a Form 8-K filed after the Special Meeting.

Key Dates

Recommendation

The proposed reverse stock split is a technical maneuver aimed at maintaining Nasdaq listing compliance and improving stock marketability, rather than reflecting a change in fundamental business performance. While necessary to address a symptom of low share price, it does not inherently signal an improvement in the company's underlying operations or financial health. Investors should hold and await further operational and financial updates to assess the company's long-term prospects.

Keywords

Reverse Stock Split, Nasdaq Compliance, Stock Marketability, Shareholder Meeting, Corporate Governance, Equity Incentive Plan, Pre-funded Warrants, RLYB