The parent company of a new specially chartered Kansas financial institution has been warned that its securities are again subject to being delisted by Nasdaq because of flagging stock prices and a delay in filing its annual report.
The Dallas-based Beneficient filed a notice with the Securities and Exchange Commission on Friday after it was informed by Nasdaq on July 16 that it was not complying with the minimum $1 per share bidding required for listing on the exchange.
The company had indicated it planned to file its annual report for the fiscal year ending March 31, 2025 on or before July 15. The report, originally due July 1, has not yet been filed with the SEC. It was delayed after a shakeup in management.
The company, with shares trading at 35 cents as of Friday, is subject to delisting from Nasdaq unless it requests a timely hearing before the exchange’s hearing panel.
The company said it plans to request a hearing and seek a stay of any suspension action by Nasdaq at least pending the ultimate outcome of the hearing process and the expiration of any extension that may be granted.
At the hearing, the company said it will demonstrate compliance with all applicable criteria for continued listing on the Nasdaq Capital Market and request an extension of time to comply with requirements established by the exchange.
“While the Company is taking definitive steps to evidence compliance with the applicable listing criteria as soon as practicable, there can be no assurance that the panel will grant the company’s request for continued listing on Nasdaq,” the company said Friday.
The company was first notified about the possibility of delisting on Jan. 13. The company was provided an initial period of 180 calendar days, or until July 14, to regain compliance with the bid price requirement.
The company delayed filing its annual report earlier this month after it revealed that Brad Heppner had stepped down from Beneficient, the company that he founded where he was chair of the board of directors and served as chief executive officer.
Heppner resigned from the company following a request from Beneficient’s legal counsel – acting at the direction of the board’s audit committee – to participate in a formal interview, according to an SEC filing.
The interview, according to the filing, was to focus on “his knowledge of certain documents and information concerning his relationship to a related entity provided to the company’s auditors in 2019.”
Beneficient is the parent company of Beneficient Fiduciary Financial, which operates in Kansas as a Technology-Enabled Fiduciary Financial Institution under a state law the Legislature enacted in 2021.
The so-called TEFFI was created with the goal of giving sophisticated investors the ability to liquidate alternative assets such as venture capital and private equity that aren’t easily converted to cash.
Kansas is believed to be the only state with a law that allows this type of financial institution to operate.
Over the years, the state’s top banking regulator had expressed concerns about regulating Beneficient’s subsidiary as well as any other similar type of company that would enter the Kansas market.
David Herndon, the state’s banking commissioner, had voiced caution to lawmakers about the fiscal health of Beneficient Fiduciary’s parent company based on negative media reports, federal regulatory actions taken against the parent firm and falling stock prices.
While Herndon’s reservations have failed to gain much traction in recent years, a joint legislative committee has scheduled a meeting for July 31 to examine the latest events related to Beneficient.
The parent company has been closely watched in Kansas because of its holdings here.
In Kansas, Beneficient Fiduciary Financial is required to set aside 2.5% of transactions for charitable contributions, with part of the proceeds going to the Department of Commerce to promote economic revitalization of Kansas communities under 5,000 people.
The Commerce Department has not yet provided information about how much it has collected from Beneficient Fiduciary Financial since it started operating.
The company also is required to pay the state a $1 million yearly assessment for operating in Kansas, which was to be submitted by mid-July.
“We continue to operate in Kansas,” Derek Fletcher, chief fiduciary officer and director for Beneficient, said in a recent interview.
“The operations continue and we remain committed to our Kansas operations for sure.”
Beneficient’s annual report for the year ending March 2024 listed more than two dozen risks facing the parent company at that time.
Among other things, the 2024 annual report said that Heppner may have had financial interests that conflict with the interests of Beneficient and its stockholders.
The report also noted that the company’s “inability to raise sufficient capital, recurring losses from operations, negative cash flows from operations, delays in executing our business plans, and the results of the recent equity awards arbitration in which over $55 million in compensatory damages were awarded to the claimant raises substantial doubt regarding our ability to continue as a going concern.”
The report continued, “If we are unable to obtain sufficient additional funding, do not have access to capital, or are not successful in negotiating a settlement with the claimant or otherwise reducing the potential current cash requirements associated with the arbitration, we may be required to terminate or significantly curtail our operations.”
Beneficient has drawn critical media coverage, especially from the Wall Street Journal.
The newspaper had examined the parent company’s relationship with GWG Holdings, a financial services firm that sold bonds to retail investors.
The idea, the newspaper reported, was that GWG would raise the money and Beneficient “would put it to work.”
“Beneficient would use money from GWG’s investor base to acquire stakes in private-equity funds and other high-flying assets, giving rank-and-file investors access to markets typically off limits to them,” the newspaper reported.
“The first funds from GWG to Beneficient, $50 million, landed in June 2019. As far as the board directors were concerned, Beneficient would use the money to expand the business, former directors said,” the newspaper reported.
“Instead, it kicked off what became one of the biggest financial blowups to strike retail investors in years,” the newspaper reported.
