Zoomcar Holdings, Inc. Announces 1-for-20 Reverse Stock Split

Rhea-AI Summary

Zoomcar Holdings (Nasdaq: ZCAR) has announced a 1-for-20 reverse stock split effective March 21, 2025. The company's common stock will begin trading on a split-adjusted basis on March 24, 2025, maintaining its Nasdaq listing under the symbol 'ZCAR'.

The reverse split will reduce Zoomcar's outstanding shares from approximately 14,208,606 to 710,431 shares. This strategic move aims to increase the per-share trading price to attract institutional investors and maintain Nasdaq listing compliance through minimum bid requirements.

The split was approved by stockholders on February 18, 2025, and ratified by the Board on March 9, 2025. The action will proportionally adjust exercise prices of outstanding stock options, warrants, and equity incentive plans. Equiniti Trust Company will serve as the exchange agent, with fractional shares being rounded up to the nearest whole share.

Positive

• Strategic move to maintain Nasdaq listing compliance
• Potential to attract institutional investors through higher share price
• Stockholder-approved corporate action
• Fractional shares rounded up, benefiting small shareholders

Negative

• Significant reduction in outstanding shares may impact stock liquidity
• Possible indication of share price challenges requiring artificial adjustment
• No fundamental business value change despite share consolidation

Insights

Zoomcar's announcement of a 1-for-20 reverse stock split represents a significant corporate restructuring with important implications for investors. This action will mechanically reduce the company's outstanding shares from approximately 14.2 million to 710,431, with a corresponding 20x increase in the share price.

The primary motivation appears defensive rather than growth-oriented. With ZCAR currently trading at $0.3069, the company is well below Nasdaq's $1.00 minimum bid price requirement. The reverse split would mathematically adjust the share price to approximately $6.14, providing substantial cushion above the compliance threshold.

While reverse splits are technically neutral events that don't change a company's market capitalization or fundamental value, they typically carry negative market perception. The relatively steep 1-for-20 ratio selected from the previously approved range (1-for-2 to 1-for-20) signals the significant price correction needed to maintain listing compliance.

For existing shareholders, positions will automatically consolidate at the 1-for-20 ratio, with fractional shares rounded up to the nearest whole share. No action is required for shareholders holding shares in book-entry form with the transfer agent.

From a market structure perspective, the significantly reduced float (total tradable shares) may potentially impact liquidity characteristics, though this depends on subsequent trading patterns and investor behavior post-split. The explicit mention of attracting institutional investors suggests management hopes the higher nominal share price might expand the potential investor base.

Financial Analyst

This reverse stock split represents a classic case of financial engineering to maintain market listing requirements rather than reflecting business improvement. The 1-for-20 ratio is particularly steep compared to more common 1-for-5 or 1-for-10 ratios, indicating the significant share price deterioration that preceded this action.

From a technical perspective, the post-split price of approximately $6.14 provides substantial buffer above Nasdaq's $1.00 minimum requirement, potentially avoiding near-term delisting concerns. However, history shows that companies implementing reverse splits often continue to experience downward price pressure as the underlying business challenges that necessitated the split typically persist.

The reduction to just 710,431 outstanding shares creates an unusually small float for a Nasdaq-listed company. This contracted share count could lead to higher volatility and potentially wider bid-ask spreads if trading volume declines proportionally.

While management suggests the higher nominal share price might attract institutional investors, this claim deserves skepticism. Sophisticated investors evaluate companies based on fundamentals rather than nominal share prices. Institutions typically view companies requiring steep reverse splits as higher risk investments, often avoiding them entirely due to the implied financial instability.

The timing - implementing the split at market close on a Friday with trading on the new basis beginning Monday - follows standard practice to minimize disruption but gives investors time to adjust positions before the split takes effect.

Bangalore, India, March 19, 2025 (GLOBE NEWSWIRE) -- Zoomcar Holdings, Inc. (Nasdaq: ZCAR) (“Zoomcar” or the “Company”),  a Nasdaq-listed leading marketplace for self-drive car sharing, announced today that it will effect a reverse stock split of its issued and outstanding shares of common stock, par value $0.0001 per share, at a ratio of 1-for-20. The reverse stock split will become effective at 4:30 p.m. Eastern Time on March 21, 2025, and the Company’s common stock will begin trading on a split-adjusted basis when the market opens on March 24, 2025. The Company’s common stock will continue to trade on the Nasdaq Global Market (“Nasdaq”) under the symbol “ZCAR.” The new CUSIP number for the Company’s common stock following the reverse stock split will be 45784G309.

At the Company’s special meeting of stockholders held on February 18, 2025, the stockholders approved a proposal to amend the Company’s Amended and Restated Certificate of Incorporation to effect a reverse stock split in the range of 1-for-2 to 1-for-20, with the final ratio to be determined by the Company’s Board of Directors (the “Board”). On March 9, 2025, the Board approved a 1-for-20 reverse stock split.

When the reverse stock split becomes effective, every 20 shares of the Company’s issued and outstanding common stock will automatically be combined into one share of common stock, without any change in the par value per share. In addition, (i) a proportionate adjustment will be made to the per share exercise price and the number of shares issuable upon the exercise of all outstanding stock options and warrants to purchase shares of common stock, and (ii) the number of shares reserved for issuance pursuant to the Company’s equity incentive plans will also be reduced proportionately. Any fraction of a share of common stock that would be created as a result of the reverse stock split will be rounded up to the nearest whole share. The reverse stock split will reduce the Company’s issued and outstanding shares of common stock from approximately 14,208,606 shares to approximately 710,431 shares.

The reverse stock split is intended to increase the per share trading price of the Company’s common stock to better attract certain institutional and other investors and maintain compliance with the minimum bid price requirement for maintaining the listing of the Company’s common stock on Nasdaq.

Equiniti Trust Company, LLC (“Equiniti”), the Company’s transfer agent, will act as the exchange agent for the reverse stock split. Registered stockholders holding pre-split shares of the common stock electronically in book-entry form are not required to take any action to receive post-split shares. Stockholders of record will be receiving information from Equiniti about the process for exchanging their pre-split shares for post-split shares.

About Zoomcar

Founded in 2013 and headquartered in Bengaluru, India, Zoomcar is a leading marketplace for car sharing focused in India. The Zoomcar community connects Hosts with Guests, who choose from a selection of cars for use at affordable prices, promoting sustainable, smart transportation solutions in India.

Forward Looking Statements

This communication contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond the Company’s control. These forward-looking statements within the meaning under applicable law, can be identified by the use terms such as “may,” “will,” “aim,” “empower,” “estimate,” “intend,” “indicate,” “continue,” “promote,” “believe,” “boosting”, “elevate,” or “enhance,” or the negatives thereof, as well as other variations or comparable terminology. We ask that you read statements that contain these terms carefully because we believe this information is important for our investors and customers. Any forward-looking statement in this press release refers solely to what is accurate as of the day it is issued or based on assumptions that Zoomcar believes to be reasonable. The actual results and outcomes may materially differ due to various factors or events beyond our control which we may not be foreseeable at all times. We cannot guarantee or assure any plan, initiative, projection, goal, commitment, expectation, or prospect set forth in this press release can or will be achieved. We undertake no obligation to alter or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, save and except as required by law.

Press Contact:
Press@zoomcar.com

Investor Relations Contact:
Investors@zoomcar.com 

FAQ

What is the ratio of Zoomcar's (ZCAR) reverse stock split announced in March 2025?

Zoomcar announced a 1-for-20 reverse stock split, meaning every 20 shares will be combined into one share.

When will ZCAR's reverse stock split take effect?

The reverse stock split becomes effective on March 21, 2025, at 4:30 p.m. Eastern Time, with split-adjusted trading beginning March 24, 2025.

How many shares will ZCAR have outstanding after the reverse split?

After the reverse split, ZCAR's outstanding shares will reduce from 14,208,606 to approximately 710,431 shares.

What happens to fractional shares in ZCAR's reverse stock split?

Fractional shares resulting from the reverse split will be rounded up to the nearest whole share.

Why is ZCAR implementing a reverse stock split?

ZCAR is implementing the split to increase per-share trading price, attract institutional investors, and maintain Nasdaq listing compliance.