China-based classical music streaming platform Kuke Music, which debuted on the New York Stock Exchange in January 2021, is at risk of being delisted from the NYSE after its share price traded below the minimum requirement for more than 30 days.
Under US listing rules, stocks that trade below $1.00 for more than 30 days are deemed non-compliant. As of November 2, Kuke’s 30-day average price for its American depositary shares was $0.55.
The company received a letter from the NYSE on September 29, requiring the firm to bring its share price and average share price back above $1.00 within six months from the said date.
In the event that the company fails to meet the requirement, “the NYSE will commence suspension and delisting procedures,” according to a statement issued last week (November 3).
In response, Kuke said it will “take all reasonable measures to regain compliance within the prescribed grace period” and that “the NYSE notification letter does not affect the Company’s business operations”.
As of Monday (November 7), Kuke’s shares fell to an over one-month low of $0.48. The company’s stock closed down 5.9% on Monday, extending its 3.8% slide on Friday (November 4).
Kuke launched its US listing in January 2021, raising $50 million after pricing its IPO of 5 million ADSs at $10 apiece.
It marked the company’s third attempt to raise funds overseas after it was delisted from China’s National Equities Exchange and Quotations in November 2017 and after two failed attempts to launch an IPO in Hong Kong, closer to home, in June 2018 and January 2019.
Its most recent closing price is now down 95% from the company’s IPO price.
The tepid appetite for Kuke’s stock comes amid a sell-off of Chinese stocks at home and overseas over concerns about the health of China’s economy, and other geopolitical factors.
The Nasdaq Golden Dragon China Index, a gauge of the largest US-listed Chinese firms, slipped 2.2% on Monday, snapping a four-day winning streak. The rebound was triggered by signs that the US audit of Chinese firms listed on New York bourses is progressing.
A landmark audit deal between US and Chinese regulators provided a relief to many companies that are at risk of being delisted from US exchanges due to potential auditing violations.
Meanwhile, Kuke is also among dozens of Chinese companies whose shares are in danger of being booted from US bourses after the US Securities and Exchange Commission added them to a so-called “provisional list” of issuers with potential auditing violations.
The company was added to that list in June. The list also includes Tencent Music Entertainment Group and NetEase, the operators of China’s largest music-streaming services.
In addition to external factors, Kuke’s weak performance in the capital markets may also be driven by its lackluster financials.
In the second quarter of the year, the company’s revenue tumbled 35% year over year to 54.44 million yuan (USD $7.53m), weighed down by lower turnover from its subscription and licensing services and smart music learning solutions, which offset the 8% gain in revenue from live music events.
Kuke, however, managed to turn in a profit of 3.4 million yuan, versus a net loss of 11.4 million yuan in the second quarter of 2021. The company’s institutional subscribers in China increased to 812 from 809.
“Going forward, in view of the challenges presented by macroeconomic environment during the second quarter, we will continue to focus on strengthening our existing product and service portfolio, and executing cost saving initiatives to help us achieve a more optimized cost structure going forward,” Kuke CEO He Yu said in August.
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