DEF: Stardust Power Seeks Stockholder Approval for Reverse Stock Split and Warrant Issuance to Regain Nasdaq Compliance

Stardust Power is asking stockholders to approve a reverse stock split and the issuance of common stock upon the exercise of certain warrants to comply with Nasdaq listing requirements.

Summary

• Stardust Power Inc. is holding its annual meeting of stockholders on June 9, 2025, to vote on several proposals.
• The proposals include electing directors, ratifying the appointment of KNAV CPA LLP as the independent auditor, approving a reverse stock split, and approving the issuance of common stock upon the exercise of certain warrants.
• The reverse stock split would be in the range of 1-for-10 to 1-for-100, with the exact ratio determined by the Board of Directors.
• The company is seeking approval to issue up to 9,584,000 shares of common stock upon the exercise of certain warrants, as required by Nasdaq Listing Rule 5635(d).
• The Board of Directors recommends voting FOR all director nominees and FOR proposals 2, 3, and 4.

Sentiment

Score: 5

Explanation: The document is primarily informational, outlining proposals for stockholder vote. While the need for a reverse stock split indicates underlying challenges, the document maintains a neutral tone.

Positives

• The Board believes that maintaining the listing of the Common Stock on the Nasdaq may be in the best interests of the Company and our stockholders.
• The Board believes that the expected increased market price per share of our Common Stock as a result of implementing a Reverse Stock Split could improve the marketability and liquidity of our Common Stock and encourage interest and trading in our Common Stock.

Negatives

• The reduced number of outstanding shares of our Common Stock resulting from the Reverse Stock Split could adversely affect the liquidity of our Common Stock by reducing trading and the number of market makers for our Common Stock, particularly if the trading price of our Common Stock does not increase as a result.
• Based on the experience of certain other companies that have effected reverse stock splits, the Reverse Stock Split could result in a devaluation of our market capitalization, if the trading price of our Common Stock does not increase in proportion to the Reverse Stock Split ratio, and the trading price of our Common Stock, on an actual or an as-adjusted basis.
• The issuance of shares of common stock upon exercise of the Inducement Warrants will have a dilutive effect on current stockholders in that the percentage ownership of the Company held by such current stockholders will decline as a result of the issuance of the Inducement Warrant Shares.

Risks

• Failure to regain compliance with Nasdaq listing rules could result in delisting of the company's stock.
• The reverse stock split may not result in a sustained increase in the stock price.
• The issuance of new shares upon warrant exercise will dilute existing stockholders' ownership.
• Provisions of the Inducement Warrants could discourage an acquisition of us by a third party.
• The Inducement Warrants may be accounted for as liabilities and the changes in value of such Inducement Warrants may have a material effect on our financial results.

Future Outlook

The company aims to regain compliance with Nasdaq listing standards through the proposed reverse stock split and warrant issuance.

Management Comments

• Our Board of Directors has carefully reviewed and considered the foregoing proposals and has concluded that each proposal is in the best interests of the Company and its stockholders.
• Therefore, our Board of Directors has approved each proposal and recommends that you vote FOR each director nominee listed under proposal 1 and FOR proposals 2, 3 and 4.

Industry Context

Many companies facing similar listing compliance issues consider reverse stock splits to increase their stock price and maintain their listing on major exchanges.

Comparison to Industry Standards

• Reverse stock splits are a common strategy for companies facing delisting from exchanges like Nasdaq, with companies such as Faraday Future and Mullen Automotive recently implementing similar measures.
• The warrant inducement offer is similar to strategies used by other companies to raise capital and reduce warrant overhang, such as those employed by Romeo Power before its acquisition.

Corporate Governance

Related Party Transactions

• The company has engaged in several related-party transactions, including administrative support agreements, warrant issuances, and consulting agreements with entities affiliated with directors and officers.
• In December 2024, the Company entered into a binding term sheet with DRE Chicago LLC, providing for loan in the principal amount of $250,000, bearing interest at a rate of 15% per year, and maturing in March 2025.

Stakeholder Impact

• The reverse stock split and warrant issuance could impact the value of existing stockholders' investments.
• The company's ability to maintain its Nasdaq listing affects its access to capital and overall financial health, impacting employees and other stakeholders.

Next Steps

• Stockholder vote on the proposals at the annual meeting on June 9, 2025.
• Board decision on whether to implement the reverse stock split and at what ratio.
• Filing of a registration statement on Form S-1 on or before the forty-fifth (45th) day following the entry into the warrant inducement transaction.
• Company must hold a meeting of stockholders every 90 days thereafter to seek Stockholder Approval until the earlier of the date that Stockholder Approval is obtained or the Inducement Warrants are no longer outstanding.

Key Dates

Keywords

reverse stock split, warrant issuance, Nasdaq compliance, proxy statement, annual meeting, directors, KNAV CPA LLP, common stock, listing rules, Stardust Power