Zhihu Announces Receipt of NYSE Notification Regarding ADS Trading Price Requirement

Rhea-AI Summary

Zhihu Inc. (NYSE: ZH; HKEX: 2390) has received a notice from the New York Stock Exchange (NYSE) regarding non-compliance due to the trading price of its American depositary shares (ADSs). The company's ADSs will continue to be listed and traded on the NYSE, but it must bring its security price back above $1.00 within six months to avoid delisting.

Insights

Market Research Analyst

When a company's stock trades below the NYSE's minimum price requirement, it reflects investor perceptions and market valuation concerns. Zhihu Inc.'s current situation indicates a potential lack of investor confidence or dissatisfaction with its financial performance or growth prospects. The trading price deficiency could also be symptomatic of broader market trends or sector-specific challenges, such as regulatory changes, shifts in consumer behavior, or increased competition.

For stakeholders, the short-term implications include the risk of volatility in the company's stock price as investors react to the compliance notice. In the long-term, if Zhihu fails to regain compliance, the threat of delisting could lead to reduced liquidity and access to capital, which may hamper future growth initiatives and investor returns. However, the company's proactive approach to addressing the issue by monitoring market conditions and considering options to cure the price deficiency is a positive step.

Financial Analyst

The notification from the NYSE serves as a critical financial health indicator for Zhihu Inc. The company's ADSs trading below $1 suggests a market capitalization that may not adequately reflect the company's intrinsic value or future growth potential. This scenario often triggers a closer examination of the company's financial statements, cash flow generation and profitability metrics by investors and analysts.

Market reaction to such news can be mixed, with some investors possibly viewing the low share price as a buying opportunity, while others may see it as a signal to divest. The company's ability to effectively communicate its strategy to address the price deficiency and to articulate its long-term value proposition will be crucial in maintaining shareholder trust.

Legal Expert

From a legal standpoint, Zhihu's receipt of the NYSE compliance notice triggers specific disclosure obligations and remedial actions as per the NYSE Listed Company Manual. The company must now operate within a six-month Cure Period to rectify the situation. Failure to do so could result in delisting, which carries significant legal and reputational consequences.

It is essential for Zhihu to adhere to the NYSE's procedural requirements during the Cure Period, including timely notifications and transparent communications with its shareholders. The legal team must ensure that all actions taken to address the compliance issue are in line with regulatory requirements and corporate governance standards to minimize potential legal risks and protect shareholder interests.

BEIJING, Dec. 29, 2023 /PRNewswire/ -- Zhihu Inc. (NYSE: ZH; HKEX: 2390) ("Zhihu" or the "Company"), a leading online content community in China, today announced that it has received a letter from the New York Stock Exchange (the "NYSE") dated December 28, 2023, notifying the Company that it is below compliance standards due to the trading price of Zhihu's American depositary shares (the "ADSs"). The notice has no immediate impact on the listing of the Company's ADSs, which will continue to be listed and traded on the NYSE, subject to the Company's compliance with other listing standards and other rights of the NYSE to delist the ADSs. The NYSE notification does not affect the Company's business operations, its U.S. Securities and Exchange Commission reporting requirements, or contractual obligations.

Pursuant to Section 802.01C of the NYSE Listed Company Manual, a company will be considered to be below compliance standards if the average closing price of its security as reported on the consolidated tape is less than US$1.00 over a consecutive 30 trading-day period. Once notified by the NYSE, the Company must bring its security price and average security price back above US$1.00 by six months (the "Cure Period") following receipt of the notification. The Company can regain compliance at any time during the Cure Period if on the last trading day of any calendar month during the Cure Period the Company's ADSs have a closing price of at least US$1.00 per ADS and an average closing price of at least US$1.00 per ADS over the 30 trading-day period ending on the last trading day of that month. In the event that at the expiration of the Cure Period, both a US$1.00 per ADS closing price on the last trading day of the Cure Period and a US$1.00 per ADS average closing price over the 30 trading-day period ending on the last trading day of the Cure Period are not attained, the NYSE will commence suspension and delisting procedures.

To address this issue, Zhihu intends to monitor the market conditions of its listed ADSs and is considering its options. As required by the NYSE Listed Company Manual, the Company expects to notify the NYSE of its intent to cure its ADS trading price deficiency within the applicable time period required by the NYSE.

About Zhihu Inc.

Zhihu Inc. (NYSE: ZH; HKEX: 2390) is a leading online content community in China where people come to find solutions, make decisions, seek inspiration, and have fun. Since the initial launch in 2010, we have grown from a Q&A community into one of the top comprehensive online content communities and the largest Q&A-inspired online content community in China. For more information, please visit https://ir.zhihu.com.  

Safe Harbor Statement

This press release contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties, and a number of factors could cause actual results to differ materially from those contained in any forward-looking statement. In some cases, forward-looking statements can be identified by words or phrases such as "may," "will," "expect," "anticipate," "target," "aim," "estimate," "intend," "plan," "believe," "potential," "continue," "is/are likely to," or other similar expressions. Further information regarding these and other risks, uncertainties or factors is included in the Company's filings with the SEC and the Stock Exchange of Hong Kong Limited. All information provided in this press release is as of the date of this press release, and the Company does not undertake any duty to update such information, except as required under applicable law.

For investor and media inquiries, please contact:

In China:

Zhihu Inc.
Email: ir@zhihu.com 

Piacente Financial Communications
Helen Wu
Tel: +86 (10) 6508-0677
Email: zhihu@tpg-ir.com 

In the United States:

Piacente Financial Communications
Brandi Piacente
Tel: +1 (212) 481-2050 
Email: zhihu@tpg-ir.com 

View original content:https://www.prnewswire.com/news-releases/zhihu-announces-receipt-of-nyse-notification-regarding-ads-trading-price-requirement-302023766.html

SOURCE Zhihu Inc.

FAQ

What is the notice Zhihu Inc. (NYSE: ZH; HKEX: 2390) received from the NYSE?

Zhihu received a notice from the NYSE regarding non-compliance due to the trading price of its American depositary shares (ADSs).

Will Zhihu's ADSs continue to be listed and traded on the NYSE?

Yes, Zhihu's ADSs will continue to be listed and traded on the NYSE, subject to the company's compliance with other listing standards and other rights of the NYSE to delist the ADSs.

What is the deadline for Zhihu to bring its security price back above $1.00?

Zhihu must bring its security price back above $1.00 within six months to avoid delisting.

What happens if Zhihu fails to bring its security price back above $1.00 within the six-month period?

If Zhihu fails to bring its security price back above $1.00 within the six-month period, the NYSE will commence suspension and delisting procedures.

What is Zhihu's plan to address this issue?

Zhihu intends to monitor the market conditions of its listed ADSs and is considering its options. The company expects to notify the NYSE of its intent to cure its ADS trading price deficiency within the applicable time period required by the NYSE.