Shares of Codere Online Luxembourg (NASDAQ: CDRO) fell Monday after the gaming firm announced that its auditor quit on December 20, potentially jeopardizing the operator’s ability to maintain its Nasdaq listing.
In late trading, shares of Codere’s online betting business fell 8.42% on volume that was more than double the daily average. According to a recent regulatory filing by the company, its auditor, Marcum, resigned because it was unable to verify the completeness of the online gaming operator’s financial records for 2021-22 due to the company’s agreements with third-party platform suppliers.
CDRO is now reliant on a successful NASDAQ appeal hearing with onerous time restrictions, even if CDRO is given an extension until May 12, 2025,” noted Stifel analyst Jeffrey Stantial in a new report to clients.
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In November, Codere Online said that company is challenging Nasdaq’s delisting notification. A hearing on the subject is scheduled for January 16, and, as Stantial mentioned, the operator is working to fill the auditor vacancy ahead of the hearing.
Codere’s potential delisting weighs on stock
Shares of Codere Online have fallen 13.24% in the last week and 17.24% in the last month, indicating that the prospect of delisting from the Nasdaq is weighing on the stock.
However, Codere Online is up 113.95% year to date, making it one of 2024’s best-performing gaming stocks. Stantial rates the company as a “buy” and sets a price target of $10, representing a 58.9% potential upside. Stocks are frequently delisted from major exchanges because they trade below levels such as $5 and $1, but Codere Online is not one of them, since it is now trading around $6.30.
Nasdaq delisted Codere because the firm failed to comply with the exchange’s Listing Rule 5250(c)(1), generally known as “the public reporting rule.” That puts some pressure on the corporation to quickly locate a new auditor.
“CDRO observes advanced negotiations with replacement candidates; we anticipate targeting before the 1/16/2025 appeal hearing, with simultaneous preparations to file the FY23 20-F and ensure a smooth transfer in auditor. According to NASDAQ policy, a successful extension would give CDRO until May 12, 2025 to complete both FY23 and FY24 F-20 files,” adds Stantial.
Auditor Resignation Adds ‘Friction’ to Codere Online
The analyst admitted that Codere Online may experience “additional friction” as a result of Marcum’s resignation, but he also stated that hope remains for the business to keep its Nasdaq listing due to its solid operational track record.
“Hence, we remain somewhat optimistic CDRO will resolve the delayed filing by the requested 5/12/2025 extension date, though acknowledging the challenging time constraint and CDRO’s limited control over auditor demands,” Stantial tweeted.
Losing its Nasdaq listing would be a setback for Codere Online since it would force the $306.67 million firm to trade over-the-counter, reducing its potential pool of professional investors.
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