DEF 14A: Wheeler REIT Seeks Stockholder Approval for Multiple Reverse Stock Splits to Maintain Nasdaq Listing

Wheeler Real Estate Investment Trust is asking stockholders to approve a series of proposals authorizing the board to enact reverse stock splits to maintain its Nasdaq listing and improve stock perception.

Summary

• Wheeler Real Estate Investment Trust is holding its Annual Meeting of Stockholders on May 6, 2024, to vote on several proposals.
• The primary proposals involve authorizing the Board of Directors to effect reverse stock splits of the company's common stock at various ratios and timeframes.
• These proposals aim to maintain the company's listing on the Nasdaq Capital Market, improve stock marketability and liquidity, and enhance the perception of the stock as an investment.
• The Board is seeking authorization for reverse stock splits at ratios ranging from one-for-two to one-for-100, to be implemented at different times between May 2024 and March 2025.
• The company has received notifications from Nasdaq regarding non-compliance with the minimum bid price rule, triggering the need for these measures.
• The Board believes that the reverse stock splits could increase the stock price, attract institutional investors, and improve market liquidity.
• The company is also seeking approval for the election of seven directors, ratification of the appointment of Cherry Bekaert LLP as the independent auditor, and advisory votes on executive compensation and the frequency of Say-on-Pay votes.
• The Board of Directors unanimously recommends voting FOR all director nominees and FOR the ratification of Cherry Bekaert LLP's appointment.
• The Board also recommends voting FOR the approval of executive compensation and FOR holding Say-on-Pay votes every three years.
• The Board of Directors also recommends voting FOR the approval of the Reverse Stock Split proposals.

Sentiment

Score: 4

Explanation: The document presents a concerning situation with the company's stock price and Nasdaq listing, but also outlines potential solutions and the Board's efforts to address the issues. The sentiment is cautiously negative.

Positives

• The proposed reverse stock splits aim to maintain the company's listing on the Nasdaq Capital Market.
• The Board believes that the increased stock price could improve marketability and liquidity.
• The company has taken steps to address Nasdaq's concerns regarding the minimum bid price rule.
• The Board is seeking flexibility to implement the reverse stock split at the most opportune time.
• The company has a clawback policy in place for incentive compensation in the event of an accounting restatement.

Negatives

• The company is currently not in compliance with Nasdaq's Bid Price Rule.
• The significant volume of Common Stock being issued monthly to meet redemption requests is placing significant downward pressure on the bid price of the Common Stock.
• The company has received a delisting warning from Nasdaq.
• Reverse stock splits can be viewed negatively by the market and may not result in a sustained increase in stock price.
• A reverse stock split may decrease the liquidity of the Common Stock.

Risks

• Failure to regain compliance with Nasdaq's Bid Price Rule could result in delisting.
• Reverse stock splits may not achieve the desired increase in stock price or market capitalization.
• The market may react negatively to the reverse stock split, leading to a decrease in overall market capitalization.
• Increased proportion of unissued authorized shares to issued shares could have an anti-takeover effect.
• The company's Series D Preferred Stock holders having the right to redeem shares is placing significant downward pressure on the bid price of the Common Stock.

Future Outlook

The company's future depends on regaining compliance with Nasdaq's listing requirements and improving its financial performance.

Management Comments

• The Board of Directors believes that the increased market price of our Common Stock expected as a result of effecting a Reverse Stock Split could improve the marketability and liquidity of our Common Stock and encourage interest and trading in our Common Stock.
• The Board of Directors deems it advisable for it to have the authority to effect a reverse stock split by May 31, 2024 in order for the Company to have the strongest chance of regaining compliance with Nasdaqs Bid Price Rule and avoiding the risk that on June 4, 2024 Nasdaq may not grant the Company a second 180 calendar day compliance period.

Industry Context

Reverse stock splits are a common strategy for companies facing delisting from major exchanges due to low stock prices.

Comparison to Industry Standards

• Many companies facing similar situations, such as those in the real estate or small-cap sectors, have implemented reverse stock splits to maintain listing compliance.
• Comparable companies that have recently undertaken reverse stock splits include [hypothetical company A] and [hypothetical company B], which experienced [hypothetical result] following the split.
• The effectiveness of a reverse stock split depends on various factors, including the company's underlying financial health and market conditions, as seen in the contrasting outcomes of [hypothetical project X] and [hypothetical project Y].

Related Party Transactions

• The Company performs property management and leasing services for Cedar, a subsidiary of the Company, pursuant to the Wheeler Real Estate Company Management Agreement.
• Wheeler REIT, L.P. and Cedars operating partnership, Cedar Realty Trust Partnership, L.P., are party to a cost sharing and reimbursement agreement.
• The Company subscribed for an investment in the amount of $3.0 million for limited partnership interests in Stilwell Activist Investments, L.P., a Delaware limited partnership (SAI).
• On September 1, 2023, and November 30, 2023, the Company subscribed for additional investments each in the amount of $3.5 million for limited partnership interests in SAI.
• On December 4, 2023, the Board of Directors, under the terms of the Charter, created a Capital Stock Excepted Holder Limit of 55% and a Common Stock Excepted Holder Limit of 86% for each of the Stilwell Investors.

Stakeholder Impact

• Stockholders face potential dilution and volatility due to the reverse stock split and stock issuances.
• The company's employees and creditors may be affected by the company's ability to maintain its Nasdaq listing and financial stability.
• The company's customers and suppliers may be impacted by the company's overall financial health and ability to operate.

Next Steps

• Stockholders will vote on the proposals at the Annual Meeting on May 6, 2024.
• The Board of Directors will determine whether to implement a reverse stock split based on market conditions and other factors.
• The company will continue to monitor its compliance with Nasdaq's listing requirements.

Key Dates

Keywords

reverse stock split, Nasdaq, listing, common stock, proxy statement, board of directors, stockholders, compliance, redemption, executive compensation