After eight years on the NASDAQ dotted with ups and downs, the Montreal tea merchant DavidsTea is about to leave this American stock exchange.
DavidsTea’s stock will begin trading on the TSX Venture Exchange next Monday.
The company had previously received a letter from NASDAQ informing it that it no longer met the admission rules because the value of the stock had slipped for 30 consecutive business days below the US$1 mark required to maintain the quoting.
NASDAQ had given DavidsTea until April 26 to comply with the rule.
DavidsTea management concluded that it would not be possible to comply with this rule within the time frame set.
DavidsTea was listed on NASDAQ in the spring of 2015. The initial share price was then set at US$19. The stock had quickly gained favor with investors, approaching the US$30 mark shortly after the initial public offering.
On Monday, investors pushed DavidsTea stock down to a NASDAQ morning low of 52 cents. At this level, the company only has a market value of 15 million US.
DavidsTea has grown rapidly since its founding in 2008. Aided by an expansion in the United States, the retailer operated more than 230 stores before the pandemic.
A reorganization under the Companies’ Creditors Arrangement Act in Canada and Chapter 15 of the Bankruptcy Code in the United States during the pandemic led to a transition in the business model. The company now has only 18 stores and now relies on online sales and a network of wholesale customers of some 3,800 grocery stores and pharmacies.
In December, the second largest shareholder of Davidstea had mentioned in an interview with La Presse that the company was to be put up for sale.
American investor Justin Dopierala, portfolio manager at Domo Capital, a Wisconsin-based firm, said the DavidsTea brand is worth “hundreds of millions” but financial results and customer feedback show that execution is not is not on the agenda.
With a stake of more than 11%, Domo Capital is the second largest shareholder in DavidsTea behind Placements Mauvais Jours, the private holding company of DavidsTea co-founder Herschel Segal.
DavidsTea announced cost-cutting measures last month that included layoffs affecting 15% of the workforce at its Montreal headquarters.
The stock will cease trading on NASDAQ at the close of trading on April 14.
For a two-week period, April 3-14, DavidsTea shares will trade on both the Canadian Venture Exchange and NASDAQ.
All of the company’s stores are now located in Canada and the majority of revenues are also generated in the country.
Management explains that a listing on the TSX Venture Exchange will reduce administrative costs as well as compliance costs.