Nasdaq to Suspend Trading in Leslie’s Stock on October 6

Leslie’s common stock is headed for suspension from Nasdaq next week—and, under the pool retailer’s proposed Chapter 11 restructuring plan, existing shareholders are slated to receive nothing when the company emerges from bankruptcy.

Nasdaq notified Leslie’s on September 25 that its common stock was subject to delisting after the shares had closed below the exchange’s $1 minimum bid requirement for 30 consecutive business days. Trading in LESL is scheduled to be suspended at the opening of business October 6 unless the company requests a hearing by October 2. Leslie’s has said it does not intend to appeal.

Importantly, Nasdaq’s delisting determination predates Leslie’s September 30 Chapter 11 filing. The determination was based on the company’s failure to meet Nasdaq’s minimum bid requirement and its ineligibility for another compliance period following a reverse stock split.

The more consequential issue for shareholders is the restructuring itself: Leslie’s plans to eliminate roughly $685 million of funded debt and shift ownership of the reorganized company to lenders and new-money investors, with all existing common equity set to be canceled for no consideration when the restructuring becomes effective.

What Happens to LESL Stock Now?

Delisting does not necessarily mean Leslie’s shares immediately stop trading altogether.

Leslie’s said it anticipates its common stock will begin trading on a market operated by OTC Markets Group after Nasdaq suspends trading. The company cautioned, however, that there is no guarantee an OTC market will develop or remain available, that broker-dealers will continue quoting the shares, or that sufficient trading volume will exist to create an efficient market.

That creates an important distinction for investors.

LESL could continue changing hands while the Chapter 11 case works its way through bankruptcy court, but those shares would still represent Leslie’s existing equity. They would not represent ownership in the reorganized company expected to emerge from Chapter 11 if the proposed plan is confirmed and becomes effective.

Leslie’s warned investors that trading during Chapter 11 is “highly speculative” and that the market price of its securities may bear little or no relationship to whatever recovery holders ultimately receive.

That warning is particularly significant here because the proposed restructuring provides no recovery for existing common shareholders.

Once Nasdaq suspends trading, it intends to file Form 25 with the Securities and Exchange Commission to formally remove Leslie’s common stock from the exchange.

Nasdaq Rule 5450(a)(1) requires listed companies to maintain a minimum bid price of $1 per share. Because Leslie’s completed a reverse stock split within the previous year, Rule 5810(c)(3)(A)(iv) makes the company ineligible for the normal compliance period that might otherwise provide additional time to regain compliance.

Who Owns Leslie’s After Bankruptcy?

Lenders holding approximately 81.1% of Leslie’s outstanding prepetition term-loan principal have already signed onto the restructuring support agreement.

Under the proposed restructuring, a $60 million equity financing will receive 55.8% of the reorganized company’s new common equity. Existing term lenders will receive another 10% on a pro rata basis. The remaining portion of the term-loan DIP financing, including certain premiums and accrued interest, is expected to convert into 30% of the new common equity. Those allocations remain subject to dilution under the company’s management incentive plan.

The result will be a Leslie’s with substantially less debt and an entirely different ownership structure.

The distinction between the company and its stock is important. Leslie’s expects its stores and operations to continue through Chapter 11, and the company intends to emerge from bankruptcy in early 2027. Existing LESL shares, however, do not carry over into that reorganized company under the proposed plan.

Could Leslie’s Ever Trade on Nasdaq Again?

Leaving Nasdaq does not necessarily mean Leslie’s can never return to a major exchange.

A reorganized Leslie’s could seek a future Nasdaq listing if it meets the exchange’s applicable requirements. Any future listing would involve the reorganized company and its new equity—not a revival of the LESL shares currently held by investors.

For now, those shares may have another life in the over-the-counter market after October 6. How long they trade and at what price remains a matter for the market.

What the proposed restructuring makes considerably clearer is where those shares ultimately end up: canceled when Leslie’s emerges from Chapter 11.

Featured Photo Credit: JHVEPhoto