ThredUp Inc. (NASDAQ:TDUP), a secondhand retail platform, is on the brink of being delisted from The Nasdaq Global Select Market and The Long Term Stock Exchange (LTSE) due to its stock price falling below the minimum required bid. On September 24, 2024, the company was notified by Nasdaq that its Class A common stock had not met the $1.00 minimum bid price for 30 consecutive business days, violating Nasdaq's Listing Rule 5450(a)(1).
The Nasdaq notice does not immediately affect ThredUp's stock listing, which continues to trade under the ticker "TDUP." To rectify the situation, ThredUp has until March 24, 2025, to boost its stock price to $1.00 or higher for at least 10 consecutive business days. Failing to meet this requirement within the 180-day grace period could lead to a second 180-day compliance period, provided ThredUp shifts to The Nasdaq Capital Market and meets all other initial listing standards, except the minimum bid price.
Similarly, on September 26, 2024, the LTSE issued a deficiency letter to ThredUp for the same price shortfall, giving the company until March 26, 2025, to comply with their minimum bid price requirement. If ThredUp's stock price does not recover, it could face delisting from the LTSE as well.
ThredUp is considering options to regain compliance, including a potential reverse stock split, but there is no guarantee of success in meeting the exchanges' requirements or maintaining other listing standards. This news is based on a press release statement from the company, and ThredUp has not provided any assurance regarding its ability to resolve the issue. The company's future on these exchanges hangs in the balance as it monitors its stock price and evaluates possible solutions to meet the minimum bid price requirement.
In other recent news, ThredUp Inc., a prominent online resale platform, has encountered challenges in its second quarter of 2024, particularly with its European segment and U.S. customer acquisition efforts. The company has decided to divest its underperforming European operations, intending to focus on the U.S. market where it foresees growth and improved financial metrics. ThredUp's Q2 revenue and active buyers have declined, with Europe witnessing an 18% fall in net revenue.
Despite these hurdles, ThredUp has introduced new AI shopping tools, including visual search and style chat, and maintains a positive outlook for its U.S. business trajectory. The company expects higher margins, adjusted EBITDA, and free cash flow in the U.S., despite acknowledging difficulties in customer acquisition and promotions that led to a revenue shortfall.
These are recent developments that also include an expansion in gross margin by 220 basis points and the achievement of positive adjusted EBITDA of 1% to 2% of revenue. ThredUp plans to enhance product experience and unit economics in the U.S. and drive process improvements to reduce variable costs. Despite revenue challenges, ThredUp sold more clothing in Q2 than in any previous quarter.
InvestingPro Insights
ThredUp's current financial situation aligns with the challenges highlighted in the article. According to InvestingPro data, the company's market cap stands at a modest $96.69 million, with its stock price closing at $0.85, well below the $1.00 minimum bid requirement. This price represents just 20.77% of its 52-week high, underscoring the significant decline that led to the delisting warnings.
InvestingPro Tips reveal that ThredUp is "quickly burning through cash" and "not profitable over the last twelve months," which may contribute to investor skepticism and the stock's poor performance. The company's revenue for the last twelve months as of Q2 2024 was $322.79 million, with a revenue growth of 8.37%. However, the operating income margin stands at -19.81%, indicating ongoing profitability challenges.
On a positive note, ThredUp boasts "impressive gross profit margins," with the gross profit margin at 67.67% for the same period. This suggests that while the company struggles with overall profitability, its core business model of secondhand retail maintains strong margins.
Investors considering ThredUp's potential recovery should note that InvestingPro offers 13 additional tips for this stock, providing a more comprehensive analysis of the company's financial health and market position.
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