Embattled biotechnology firm NexImmune (NASDAQ:NEXI) is seeing shares skyrocket on Thursday, possibly due to anticipation around a lingering business matter. Due to severe financial struggles, management has sought to dissolve the enterprise. However, it has consistently failed to meet quorum. Still, the dramatic rise of NEXI stock today suggests that a resolution has passed or has a strong chance of doing so.
In a letter dated June 21, NexImmune’s leadership invited shareholders to meet earlier this morning. The special meeting was to be held virtually via a live webcast. Management took this course of action to help improve efficiency and also ensure greater participation. This last point is especially important for the company due to its prior struggles, which are listed below:
- On Dec. 21, 2023, NexImmune initiated a special meeting to consider a corporate dissolution. However, it was adjourned due to a lack of quorum.
- On Jan. 18, 2024, NexImmune reconvened the meeting. However, the matter was again adjourned due to lack of quorum.
- Management scheduled a second adjournment for Feb. 7 but postponed it prior to its occurrence.
- On Feb. 2, the biotech firm announced that it would sell shares and warrants of NEXI stock for approximately $3.67 million.
- The company made other efforts to secure much-needed financing, but they were unsuccessful.
Ultimately, the board of NexImmune felt that dissolution was the best decision in an unfortunate circumstance.
NEXI Stock Pops Higher on Hopes of an Orderly Exit
One critical factor to consider regarding NEXI stock is that the majority of its shareholders consistently voted for dissolution. However, because the quorum — or the minimum number of shareholders needed to be present — was never met, an ultimate resolution could not be achieved. It’s possible, then, that today’s dramatic lift may signal such a resolution.
Either way, the fundamental reason for bullishness in NEXI centers on the implied orderly exit. It’s clear that many participating shareholders want to dissolve the entity. The reason is that, per management, one of the few other alternatives is to declare bankruptcy, which could be a messy situation. Most importantly, common stock shareholders would be last in line to recover any assets following a liquidation.
The advantage of a dissolution or even a gradual winding down of the business is management’s control of the process. In NexImmune’s case, it could cease operations under its own terms, settle with creditors and then distribute any available assets to shareholders.
Finally, a dissolution is preferable over a bankruptcy when it comes to reputation. Bankruptcies are public and carry a stigma that’s difficult to shake. However, a dissolution is more discrete and can potentially better preserve business and investor relationships for any future endeavors.
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On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
