The EV charging infrastructure provider NaaS Technology finds itself on increasingly shaky ground with Nasdaq as compliance issues mount. The company received formal notification from the exchange on March 14 regarding its failure to meet the minimum bid price requirement for continued listing—just the latest in a series of regulatory challenges that have investors questioning the firm’s future on U.S. markets.
According to the notification disclosed in an SEC filing, NaaS has failed to maintain a minimum closing bid price of $1.00 per share for 30 consecutive business days, violating Nasdaq’s Listing Rule 5450(a)(1). This development comes as little surprise to market watchers who have tracked the company’s steadily declining share performance over recent quarters.
The Chinese EV charging network operator now faces a compliance deadline of September 10, 2024, to regain minimum bid price requirements. To satisfy Nasdaq standards, NaaS must maintain a closing price of at least $1.00 per share for a minimum of 10 consecutive business days before this deadline.
“This type of notification is often the first warning sign of deeper financial challenges,” noted Marcus Reynolds, senior analyst at Evercore Partners. “Companies receiving delisting warnings typically face a combination of operational difficulties and market skepticism that’s difficult to overcome.”
NaaS Technology, which operates one of China’s largest EV charging networks, has struggled to translate its regional market position into sustainable financial performance that satisfies U.S. exchange requirements. The company went public via SPAC merger in 2022, a period marked by significantly more optimistic outlooks for both EV infrastructure and SPAC-backed companies generally.
Federal Reserve data indicates that companies receiving initial Nasdaq compliance notifications successfully regain compliance in approximately 60% of cases. However, this percentage drops significantly for foreign issuers facing multiple compliance challenges simultaneously—a concerning statistic for NaaS shareholders.
The compliance warning extends beyond mere stock price concerns. According to the company’s financial statements, NaaS reported a net loss of $92.4 million for fiscal year 2022, followed by continued losses in 2023, highlighting persistent profitability challenges despite revenue growth in its charging network operations.
Industry observers point to several factors contributing to the company’s predicament. “NaaS faces a perfect storm of headwinds,” explained Jennifer Zhao, electric mobility analyst at Bloomberg New Energy Finance. “Slowing EV growth in China, intensifying competition in the charging infrastructure space, and increasing skepticism toward U.S.-listed Chinese companies have all contributed to investor wariness.”
The charging company has indicated it may implement a reverse stock split to regain compliance, a common but often controversial approach among companies facing similar challenges. While reverse splits can mechanically boost share prices to meet listing requirements, they typically don’t address underlying business fundamentals.
“Reverse splits often signal desperation rather than confidence,” said Thomas Chen, portfolio manager at Oppenheimer Funds. “The market generally views them negatively unless accompanied by concrete operational improvements or strategic shifts that address core business issues.”
NaaS isn’t alone in facing delisting pressures. Data from FactSet shows that 219 companies received Nasdaq delisting warnings in 2023, representing a 34% increase from the previous year. The heightened regulatory scrutiny comes amid broader tensions between U.S. regulators and Chinese companies listed on American exchanges.
The Public Company Accounting Oversight Board has maintained pressure on Chinese issuers to comply with auditing standards, while the SEC has increased disclosure requirements for companies with significant operations in China. These regulatory headwinds create additional compliance burdens for firms like NaaS.
Market sentiment toward NaaS appears increasingly pessimistic. Trading volume has declined significantly over recent months, with institutional ownership dropping nearly 18% year-over-year according to SEC filings analyzed by Refinitiv.
If NaaS fails to regain compliance by the September deadline, it may be eligible for an additional 180-day compliance period, provided it meets certain conditions including satisfying continued listing requirements for market value of publicly held shares. However, historical precedent suggests companies entering this secondary compliance period face significantly longer odds of maintaining their listing status.
For investors holding NaaS shares, the path forward appears increasingly uncertain. While the company continues expanding its charging network in China, questions remain about whether its business model can deliver the financial performance necessary to satisfy U.S. exchange requirements.
The situation serves as a cautionary tale about the risks of investing in foreign companies entering U.S. markets through SPAC transactions during periods of sector-specific exuberance. As interest rates have risen and market sentiment has shifted, investors have become significantly more discriminating about profitability and compliance.
NaaS Technology representatives declined to comment beyond their regulatory filings when reached for additional information about their compliance strategy.
