Direct Digital Holdings Announces Receipt of Expected Delinquency Notification Letter From Nasdaq Relating to Non-Compliance with Listing Rule 5250(c)(1)
Direct Digital Holdings announced that it received a delinquency notification from the Nasdaq on May 21, 2024, due to a delay in filing its quarterly report for Q1 2024. This follows an earlier notification on April 17, 2024, for failing to file its annual report for 2023 on time. The company must submit a compliance plan by June 17, 2024, and, if accepted, could have until October 14, 2024, to regain compliance. As of now, this non-compliance has no immediate effect on the listing or trading of its stock (symbol: DRCT) on the Nasdaq Capital Market. The company is working to file the delayed reports as soon as possible.
- The company continues to trade on Nasdaq despite the non-compliance.
- Direct Digital Holdings is actively working to file the delayed reports promptly.
- Nasdaq may grant the company up to 180 days to regain compliance.
- Company received a delinquency notification from Nasdaq for late filing of Q1 2024 report.
- Previously received a delinquency notification for delayed 2023 annual report.
- Non-compliance with Nasdaq Listing Rule 5250(c)(1).
- No assurance that Nasdaq will accept the compliance plan or grant additional time.
- Potential risk of delisting if compliance is not regained.
Insights
Non-compliance with Nasdaq Listing Rule 5250(c)(1) has significant implications for Direct Digital Holdings and its investors. The delayed filing of the Quarterly Report on Form 10-Q and the earlier delinquency in filing the Annual Report on Form 10-K could indicate underlying operational or financial management issues. Investors typically view timely filings as a sign of robust organizational health. Delays can create uncertainty and affect stock price volatility.
Short-term implications might include increased caution among investors, potentially leading to stock price depreciation. Even though the company's current listing status isn't immediately affected, repeated non-compliance could lead to more severe penalties, including delisting threats. Long-term investors should monitor the situation closely to understand whether these delays are isolated incidents or indicative of deeper systemic issues.
Moreover, the necessity for Nasdaq to approve a compliance plan adds another layer of uncertainty. Should the company fail to meet the June 17, 2024 deadline, potential outcomes include a loss of investor confidence and a higher cost of capital, as investors may demand a premium for the increased risk.
From a market perspective, non-compliance and repeated delinquency notices like the ones received by Direct Digital Holdings inevitably raise red flags. These notices can lead to negative sentiment among traders and could result in increased short-selling activity as market participants anticipate possible price declines.
The company's proactive communication about the issue and ongoing efforts to rectify the situation are positive, but investor trust has already been strained. The market will observe not just the filing of these overdue reports but also the content they reveal about the company's financial health.
Critical evaluations will focus on why the delays occurred and whether they reflect broader operational inefficiencies or financial instability. The approval of a compliance plan by Nasdaq would offer some reassurance, but the stock's performance will likely remain under pressure until the filings are completed and any underlying issues are addressed.
Non-compliance with Nasdaq Listing Rule 5250(c)(1) introduces multiple legal ramifications. The company is now tasked with remedying its filing deficiencies by June 17, 2024, to avoid potential delisting. Legally, this situation places Direct Digital Holdings under scrutiny, not just by regulators like Nasdaq and the SEC, but also by shareholders who might seek legal recourse if they believe the non-compliance has adversely affected their investments.
It's essential to consider that should the company fail to meet Nasdaq's compliance requirements, they could face heightened regulatory actions. This would not only affect their market presence but could also lead to litigation risks from shareholders. Failure to file timely reports often raises questions about transparency and governance, which are important for maintaining investor trust and complying with securities laws.
The ongoing diligence in rectifying these filing issues is crucial, but the legal uncertainties around future compliance and potential penalties make the situation precarious.
As previously disclosed by press release on April 23, 2024, the Company received a delinquency notification letter from Nasdaq on April 17, 2024 due to the Company's non-compliance with the Rule as a result of the Company's failure to timely file its Annual Report on Form 10-K for the year ended December 31, 2023 (the "Form 10-K").
The Notice states that the Company has until June 17, 2024 to submit to Nasdaq a plan to regain compliance with the Rule. If Nasdaq accepts the Company's plan to regain compliance, then Nasdaq may grant the Company up to 180 calendar days from the prescribed due date of the Form 10-K, or until October 14, 2024, to file the Form 10-K and the Form 10-Q to regain compliance; however, there can be no assurance that these events will occur.
Neither the Notice nor the Company's noncompliance with the Rule has an immediate effect on the listing or trading of the Company's securities on Nasdaq, which will continue to trade on The Nasdaq Capital Market under the symbol "DRCT." The Company continues to work diligently to complete the Form 10-K and the Form 10-Q and plans to file the same as promptly as possible to regain compliance with the Rule.
About Direct Digital Holdings
Direct Digital Holdings (Nasdaq: DRCT), owner of operating companies Colossus SSP, Huddled Masses, and Orange 142, brings state-of-the-art sell- and buy-side advertising platforms together under one umbrella company. Direct Digital Holdings' sell-side platform, Colossus SSP, offers advertisers of all sizes extensive reach within general market and multicultural media properties. The Company's subsidiaries Huddled Masses and Orange142 deliver significant ROI for middle market advertisers by providing data-optimized programmatic solutions at scale for businesses in sectors that range from energy to healthcare to travel to financial services. Direct Digital Holdings' sell- and buy-side solutions manage on average over 125,000 clients monthly, generating over 300 billion impressions per month across display, CTV, in-app and other media channels.
Cautionary Note Regarding Forward-Looking Statements
This press release may contain forward-looking statements within the meaning of federal securities laws that are subject to certain risks, trends and uncertainties.
As used below, "we," "us," and "our" refer to the Company. We use words such as "could," "would," "may," "might," "will," "expect," "likely," "believe," "continue," "anticipate," "estimate," "intend," "plan," "project" and other similar expressions to identify forward-looking statements, but not all forward-looking statements include these words. All of our forward-looking statements involve estimates and uncertainties that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. Accordingly, any such statements are qualified in their entirety by reference to the information described under the caption "Risk Factors" and elsewhere in our most recent Annual Report on Form 10-K (the "Form 10-K") and subsequent periodic and or current reports filed with the Securities and Exchange Commission.
The forward-looking statements contained in this press release are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. As you read and consider this press release, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (many of which are beyond our control) and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual operating and financial performance and cause our performance to differ materially from the performance expressed in or implied by the forward-looking statements. We believe these factors include, but are not limited to, the following: the restrictions and covenants imposed upon us by our credit facilities; our ability to secure additional financing to meet our capital needs; any significant fluctuations caused by our high customer concentration; risks related to non-payment by our clients; reputational and other harms caused by our failure to detect advertising fraud; operational and performance issues with our platform, whether real or perceived, including a failure to respond to technological changes or to upgrade our technology systems; restrictions on the use of third-party "cookies," mobile device IDs or other tracking technologies, which could diminish our platform's effectiveness; unfavorable publicity and negative public perception about our industry, particularly concerns regarding data privacy and security relating to our industry's technology and practices, and any perceived failure to comply with laws and industry self-regulation; our failure to manage our growth effectively; the difficulty in identifying and integrating any future acquisitions or strategic investments; any changes or developments in legislative, judicial, regulatory or cultural environments related to information collection, use and processing; challenges related to our buy-side clients that are destination marketing organizations and that operate as public/private partnerships; any strain on our resources or diversion of our management's attention as a result of being a public company; the intense competition of the digital advertising industry and our ability to effectively compete against current and future competitors; any significant inadvertent disclosure or breach of confidential and/or personal information we hold, or of the security of our or our customers', suppliers' or other partners' computer systems; as a holding company, we depend on distributions from Direct Digital Holdings, LLC ("DDH LLC") to pay our taxes, expenses (including payments under the Tax Receivable Agreement) and any amount of any dividends we may pay to the holders of our common stock; the fact that DDH LLC is controlled by DDM, whose interest may differ from those of our public stockholders; any risks associated with the material weakness that was identified in our review of internal control over financial reporting as of December 31, 2022; any failure by us to maintain or implement effective internal controls or to detect fraud; our ability to engage an independent registered public accounting firm and complete the audit of our financial statements for the fiscal year ended December 31, 2023; and other factors and assumptions discussed in our Form 10-K and subsequent periodic and current reports we may file with the SEC. Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove to be incorrect, our actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and except as required by law, we undertake no obligation to update any forward-looking statement contained in this press release to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors that could cause our business not to develop as we expect emerge from time to time, and it is not possible for us to predict all of them. Further, we cannot assess the impact of each currently known or new factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Contacts
Brett Milotte, ICR
investors@directdigitalholdings.com
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FAQ
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