Reverse stock splits and Nasdaq's US$1 rule at listed esports companies

A handful of the companies that own esports teams are listed on Nasdaq, the US stock exchange, and several of them have spent long stretches trading under US$1.00 a share. When a price stays under that line, a procedure starts that can end with the company's removal from the market. The usual answer is a reverse stock split, a decision that merges existing shares into fewer, more expensive ones.

Since 2023 the tool has come up again and again. FaZe Clan's shareholders approved one before the company was acquired, GameSquare Holdings, FaZe's owner, carried one out in August 2026, the parent of Ninjas in Pyjamas used one in a form adapted to foreign shares, Super League Enterprise did three and Esports Entertainment Group two. This guide explains what a reverse split is, what it changes and what it does not, who has to approve it, how Nasdaq's minimum bid rule works from the first notice to a possible hearing, and which limits the exchange now sets on companies that rely on splits again and again. Each step is illustrated with a case from the scene.

Nasdaq Listing Rules 5550(a)(2) and 5810(c)(3)(A), text in force in September 2026.

What a reverse stock split is

The definition used by the US Securities and Exchange Commission (SEC), the federal regulator of the stock market, on its investor education site is direct: when a reverse split is completed, each outstanding share of the company is converted into a fraction of a share. The result is a smaller number of shares, each priced higher. The SEC's own example is a one-for-ten split, in which every ten shares become one: a holder of 10,000 shares before the split holds 1,000 afterward.

The ratio is written as new shares for old ones. A 1-for-8 split, the ratio GameSquare Holdings used in August 2026, turns every eight shares into one. A 1-for-40 split, one of Super League Enterprise's, turns every forty into one. The higher the second number, the stronger the consolidation.

The SEC names two reasons a company may choose a reverse split. The first is to raise a trading price that seems too low to attract investors. The second is to regain compliance with an exchange's minimum bid price requirement. In esports, the second reason has been the one stated most often.

What it changes for a holder, and what it does not

In principle a reverse split changes the size of each slice, not the size of the cake. A holder who owned 1% of a company before the split owns 1% after it, through fewer shares. The value of the holding on the day the split takes effect is, in arithmetic, the same: the number of shares is divided by the ratio, and the price per share is multiplied by it.

What follows is set by the market. The SEC warns that investors may lose money through price movements after a reverse split, and nothing guarantees that the new price holds at the multiplied level. NIP Group made the same point about its own change in June 2026: it said it expected the price of its listed shares to rise in proportion to the ratio, and added that there could be no assurance it would.

Fractions are the other practical point. A holder whose shares do not divide exactly by the ratio would end up with part of a share. The SEC notes that in some splits small holders are cashed out, receiving money for their partial shares, and may thereby stop owning the company's stock at all. In NIP Group's case, no fractions of the new listed shares were issued: the depositary bank sold the leftover entitlements together and passed the net proceeds to the holders concerned.

A split can also take a company private. For a split that would do so, the SEC says a Schedule 13E-3, the disclosure filed for going-private transactions, may be required. GameSquare's proxy statement of July 2026 stated that its split was not part of such a transaction, The Esports Advocate reported.

Who decides a reverse split

The SEC has broad authority over corporate activity, but whether a company may declare a reverse split, and whether its shareholders must approve it, is generally governed by state corporate law and by the company's own articles of incorporation and bylaws, its investor site explains. The answer therefore depends on where the company is incorporated and on what its founding documents say.

When a vote is needed, a proxy statement on Schedule 14A, the document that tells shareholders what they are voting on, may be required. A reporting company can give notice of the split itself in a current report on Form 8-K, in a quarterly report on Form 10-Q or in an annual report on Form 10-K, all filed with the SEC.

GameSquare followed the voting route. Its board adopted the split resolution on July 1, 2026, the proxy was filed on July 15 and a virtual special meeting on August 13 approved a range rather than a single figure: any ratio from 1-for-2 to 1-for-8, to be chosen by the board. The board fixed the ratio at 1-for-8 after the market close of August 18, The Esports Advocate reported, and the split took effect on August 24. The company's chief executive, Justin Kenna, presented it as support for the Nasdaq listing and as a way to reach what he called a more appropriate share price, adding that it could broaden the company's appeal to institutional investors whose mandates may limit the ownership of lower-priced stocks, according to the same outlet.

A range leaves the board room to adjust. Between the date of the vote and the date the split takes effect, the price can move, and a board that holds several ratios can choose one that clears the threshold with a margin.

Nasdaq's US$1.00 rule

Every company listed on Nasdaq must keep meeting continued listing standards, a set of minimums that includes the share price, shareholders' equity and the market value of publicly held shares. The price standard is the simplest. Listing Rule 5550(a)(2), which applies to the Nasdaq Capital Market, sets a minimum bid price of US$1 per share. Listing Rule 5450(a)(1) sets the same US$1 minimum for the Nasdaq Global Market. The bid price is the highest price a buyer is offering for the share; the test uses the closing bid, its level at the end of each trading day.

The two rule numbers reflect Nasdaq's tiers. The Capital Market, governed by the 5500 series of the rulebook, is the tier for companies that meet its requirements but are not on the Global Market, governed by the 5400 series. GameSquare's notice was issued under Rule 5550(a)(2); NIP Group's, under Rule 5450(a)(1). The threshold is identical, but the tier matters for what happens if the first grace period runs out, as the next sections explain.

NIP Group's case adds a further layer. The company does not list its ordinary shares on Nasdaq but American depositary shares, or ADSs: certificates issued by a bank in the United States, each standing for a set number of shares of a foreign company. The US$1.00 test applies to the ADS, the instrument that trades. So the cure can be reached by changing how many underlying shares each ADS represents, without touching the shares themselves.

The clock: from the notice to the deadline

Under Rule 5810(c)(3)(A), a bid price deficiency exists once the shortfall has lasted 30 consecutive business days. Nasdaq's Listing Qualifications Department, the office that monitors listed companies, then sends a notice, and the company has 180 calendar days from that notification to regain compliance. The notice is a warning, not a sanction: NIP Group's release of March 2026 said it had no current effect on the listing or the trading of its ADSs.

The notice must also be made public. Rule 5810(b) requires the company to announce that it received it, the rules at issue and the specific basis for the deficiency, as promptly as possible and no later than four business days after receipt, by a Form 8-K where one is required, or by a press release.

A Capital Market company that is still under the line at the end of the first 180 days may obtain a second period of the same length. Rule 5810(c)(3)(A)(ii) sets two conditions on the 180th day: the company meets the market value of publicly held shares requirement and the other initial listing standards of the Capital Market, except the bid price, and it notifies Nasdaq that it intends to cure the deficiency. A company that does not state that intention is not eligible. A Global Market company has no second period on its own tier: under paragraph (i) of the same rule, it may transfer to the Capital Market, provided it meets that tier's market value of publicly held shares requirement and notifies Nasdaq of its intent to cure, and it then receives the remainder of the compliance period there.

GameSquare went through every step but the last. Its notice arrived on September 10, 2025, after 30 business days under US$1.00. The first period ran to March 9, 2026 without a cure. On March 10, Nasdaq granted a second period to September 7, 2026, on the basis that the company met the other initial listing requirements of the Capital Market and had given written notice that it would cure the deficiency by a reverse split if necessary, The Esports Advocate reported on August 11, 2026.

How compliance is regained

The cure is set in the same rule: compliance can be achieved by meeting the applicable standard for a minimum of 10 consecutive business days. For the minimum bid, that means ten closing bids in a row at or above US$1.00 inside the compliance period.

Ten days is the general case, not a guarantee. Rule 5810(c)(3)(H) allows Nasdaq staff to require a longer run, generally no more than 20 consecutive business days, before deciding that a company has shown it can keep its price above the line. In using that discretion, staff may weigh the margin by which the price clears the threshold, trading volume, the market maker montage (which the rule describes as the number of market makers quoting at or above US$1.00) and the trend of the price.

The ten days also have to fit inside the deadline. A split that takes effect on the last day of the period cannot produce ten qualifying closes in time. In GameSquare's case, The Esports Advocate set out that any reverse split had to be completed no later than ten business days before September 7, which put the practical deadline in the last week of August. The split took effect on August 24, and the stock then closed at or above US$1.00 for ten consecutive business days, from August 24 to September 4. Nasdaq wrote on September 8 that it considered the matter closed, according to the company's Form 8-K as reported by the outlet.

NIP Group's timetable followed the same pattern. Its notice of March 24, 2026 counted 32 consecutive business days under US$1.00 and gave it until September 21. Its ADS ratio change took effect on July 6, the ten qualifying closes ran from July 7 to July 21, and Nasdaq confirmed compliance in writing on July 21, the company said in a release of July 24.

When there is no grace period

The 180-day periods are not available to every company. Nasdaq's rule now sets three situations in which a company gets no grace period or does not count as cured.

The first concerns very low prices. Under Rule 5810(c)(3)(A)(iii), a company whose stock has a closing bid of US$0.10 or less for ten consecutive business days is ineligible for any compliance period, and the security is suspended from trading on Nasdaq.

The second concerns repeated splits. Under Rule 5810(c)(3)(A)(iv), a company that falls below the bid price requirement gets no compliance period if it has carried out a reverse split over the prior year, or one or more reverse splits over the prior two years with a cumulative ratio of 250 shares or more to one. Staff then issue a delisting determination directly.

The third concerns side effects. A reverse split reduces the number of shares, and other listing standards count shares or holders. Rule 5810(c)(3)(A) states that a company will not be considered to have regained compliance with the bid price requirement if the action it took to cure it results in its security falling below the numeric threshold of another listing requirement. The company remains out of compliance until it has cured that other deficiency and then met the bid price standard for ten consecutive business days.

Telling the market about a split

A reverse split on Nasdaq is also a timed event with its own notice rules. Rule 5250(e)(7) requires the company to notify Nasdaq no later than 12:00 p.m. Eastern Time, ten calendar days before the proposed market effective date, the day the stock starts trading on the new basis, by submitting a complete Company Event Notification Form that includes a draft of its public announcement.

That announcement is governed by Rule 5250(b)(4): the company must disclose the split publicly by 12:00 p.m. Eastern Time at least two business days before the market effective date. Nasdaq will not process a reverse split unless both requirements have been met on time. A company that goes ahead regardless, or that gives incomplete or inaccurate information on the timing or the ratio, has its stock halted under the exchange's trading halt rule.

If the deadline passes

When a company has not regained compliance by the end of its last available period, Nasdaq staff issue a staff delisting determination. The company may ask for a hearing before a Nasdaq Hearings Panel. Under Rule 5815, it has seven calendar days from the date of the staff delisting determination notification to request one, and the request carries a non-refundable fee of US$20,000.

A timely request ordinarily stays the suspension and delisting while the panel considers the case, but not in every case. Rule 5815(a)(1)(B)(ii) lists exceptions, among them a company that was given the second 180-day period and still failed the bid price test, and a company whose bid fell to US$0.10 or less. For those, the securities are suspended immediately and remain suspended, unless the panel decides after the hearing to reinstate them. A panel may grant an exception of up to 180 days from the date of the staff determination, under Rule 5815(c)(1)(A).

For a Capital Market company, a missed second period therefore means suspension from trading while its appeal is heard. GameSquare's case was a second-period case: had it missed September 7, staff would have issued a delisting notice and the company could have appealed to a hearings panel, The Esports Advocate reported in August.

Five esports cases

The listed companies of the scene have used reverse splits at very different scales. The table sets out the cases reported by the sources, with the ratio, its date and what followed.

Super League shows how quickly consolidations add up. Its three splits multiply to 9,600 to 1: a holder of 9,600 shares before September 2023 held one share after the third. The Esports Advocate put the 2019 initial public offering price of US$11.00 at the equivalent of US$105,600 a share once adjusted for the three splits. Its last two splits, about seven months apart, multiply to 480 to 1.

Esports Entertainment Group went further and faster: a 1-for-100 split effective February 21, 2023 to address a minimum bid deficiency, then a 1-for-400 split in December 2023, a combined 1-for-40,000 within about ten months. Its exit from Nasdaq in February 2024 was not a bid price delisting: The Esports Advocate describes it as voluntary, at a time when the company was under a Nasdaq panel monitor and out of compliance with the stockholders' equity requirement, another of the continued listing standards.

FaZe Clan had listed on Nasdaq through a merger with a special purpose acquisition company, a listed shell created to buy a private business, in what The Esports Advocate describes as a US$725 million listing. It received a bid price deficiency warning in March 2023 and its shareholders approved a reverse split of 1-for-20 or 1-for-30 in July 2023, according to The Esports Advocate. GameSquare acquired it in March 2024, and FaZe's common stock stopped trading at the close on March 8, 2024, about 20 months after the listing.

Choosing a ratio: a worked example

The ratio decides whether a split clears the threshold, and by how much. The worked example below takes GameSquare's closing price of US$0.3782 on August 13, 2026, the day of its vote, and multiplies it by four ratios inside the range its stockholders approved. These are theoretical figures, computed from one closing price; they are not prices the stock traded at.

At 1-for-2 the theoretical price stays under US$1.00, so the split would not have done its job. At 1-for-3 it clears the line by about 13 cents, which leaves little room for ten consecutive closes if the price slips. At 1-for-8, the ratio the board chose, it lands about three times above the threshold.

What happened next shows why the margin matters. GameSquare reported about 103.8 million shares outstanding on August 13; after the split, about 12.8 million were outstanding. Its stock closed at US$2.95 on September 4, the last day of the ten-day run, about 2.5% under the theoretical US$3.03 of the vote day, and at US$3.52 on September 9, which valued the company at about US$45 million, The Esports Advocate reported. The ten closes held because the starting point was well above US$1.00.

A reverse split buys a company time on the exchange, not value: the ratio sets the starting price, and the market decides whether it holds for ten days.

The rule limits on repeated splits change the calculation for the next deficiency, not the current one. A company that falls back under US$1.00 within a year of a reverse split, or after splits totaling 250 to 1 or more over the prior two years, would face a delisting determination with no compliance period, under the rule text in force. How each limit applies depends on the dates and ratios of the company's own history.

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