Digital Brands Group, Inc. (NASDAQ:DBGI), a Delaware-incorporated apparel retailer with a market capitalization of $2.88 million, announced the implementation of a reverse stock split of its common shares.
The reverse stock split, at a ratio of 1-for-50, was effective as of 5:00 PM ET on Thursday. Following the split, the total number of outstanding shares was reduced to 817,872. According to InvestingPro data, the company faces significant financial challenges, with a weak overall Financial Health Score of 1.11 out of 10.
The decision for the reverse stock split was made during the company's virtual annual stockholders meeting held on December 2, 2024. Stockholders approved the amendment to the company's amended and restated certificate of incorporation, which allowed the Board of Directors to choose a ratio for the reverse stock split within the range of 1-for-10 to 1-for-50.
The Board elected to implement the split at the maximum approved ratio. This decision comes as the stock has experienced a significant decline of 97.65% year-to-date, with InvestingPro analysis revealing 14 additional warning signals about the company's performance and financial health.
The reverse stock split is intended to increase the per-share trading price of Digital Brands Group's common stock, which could help the company maintain compliance with Nasdaq's minimum bid price requirement. Shares of common stock will continue to trade under the ticker symbol "DBGI."
The company filed a certificate of amendment with the Secretary of State of the State of Delaware on December 9, 2024, to effectuate the reverse stock split, and the amendment became effective on December 12, 2024. The company's warrants, exercisable to purchase one share of common stock and trading under the symbol "DBGIW" on The Nasdaq Stock Market LLC, are also affected by the reverse stock split.
This move follows the company's previous name change from Denim LA, Inc. to Digital Brands Group, Inc., which took place on February 25, 2016. The company, headquartered in Austin, Texas, operates within the retail-apparel and accessory stores industry, generating $12.2 million in revenue over the last twelve months with a gross margin of 40.25%. Despite these metrics, the company faces operational challenges with negative EBITDA of $4.62 million and a concerning current ratio of 0.29. For a comprehensive analysis of DBGI's financial health and future prospects, investors can access the detailed Pro Research Report available on InvestingPro, which covers over 1,400 US equities with expert insights and actionable intelligence.
In other recent news, Digital Brands Group, a diversified portfolio of luxury lifestyle brands, has announced a 1-for-50 reverse stock split, a strategic move aimed at bringing the company back into compliance with Nasdaq's minimum bid price requirement. In response to a 33% year-over-year revenue decline and high debt-to-equity ratio, as reported by InvestingPro, the company is shifting its focus from debt reduction towards growth initiatives.
In a recent shareholder meeting, the company received approval for the reverse stock split and re-elected its board of directors. Digital Brands Group also faces the potential risk of being delisted from the Nasdaq due to non-compliance with the minimum stockholders' equity requirement. Despite these challenges, the company has managed to temporarily raise its stockholders' equity above the $2.5 million threshold through various transactions.
The company reported a decrease in net revenue to $2.4 million in its third quarter 2024 earnings call, primarily due to the discontinuation of a low-margin wholesale account. However, the company's net loss improved to $3.5 million from $5.4 million year-over-year. Looking forward, Digital Brands Group anticipates a $4.5 million earnings boost in 2025 from non-cash expenses and a $3.1 million reduction in interest expenses.
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