Fat Brands, which has filed for bankruptcy, will be dropped from the Nasdaq Stock Exchange next week after its stock was delisted and the fast-food restaurant chain operator opted not to fight it.
That did not keep the company’s stock from soaring 20% through mid-afternoon trading on Friday.
Fat Brands received a delisting notice from Nasdaq earlier this week, its fourth such notice this month. The notice is due to the bankruptcy filing, concerns about the impact that will have on the company’s shareholders and about Fat Brands’ ability to remain in compliance with the exchange’s requirements for listing.
Fat Brands will stop trading on Wednesday and will be listed over-the-counter, on the Pink Limited Market.
That market “is a significantly more limited market,” according to the filing, “and could further depress the trading price of the securities.”
Delisting routinely follows a bankruptcy filing of a publicly traded company, as bankrupt companies typically get broken up, restructured or sold and can’t comply with the various exchange rules.
But trading over-the-counter typically must be done through a broker, which can make it more difficult for the shares to be sold.
Fat Brands went public in 2017 in a so-called mini-IPO after the owner of Fatburger acquired Ponderosa and Bonanza. The company acquired mostly small, struggling brands until 2020 when it went on a $900 million buying spree through 2021.
The company bought the chains, including Johnny Rockets, Twin Peaks and Fazoli’s, using a series of whole business securitization financing. That represents the bulk of nearly $1.5 billion in secured debt on the company.
As for its stock, Fat Brands stock has lost 93% of its value over the last year and 96% since its IPO. Its share price is low enough that buying can lead to wild swings. At one point the shares more than doubled before falling back down to earth but remain up around 20%.
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