What happened
Shares of Triterras (TRIT), which provides a block-chain-enabled trade financing platform, fell sharply at the open on Thursday, losing as much as 25% of their value. At roughly 11:30 a.m. ET, the stock was still off by around 20%.
The big news came out after the close yesterday when the company provided an update on its long-delayed annual report (Form 20-F) dated Feb. 28, 2021. Investors seem to be getting tired of this ongoing drama.
So what
To sum up the update, Triterras will not meet a Nasdaq deadline for providing its annual report to the Securities and Exchange Commission (SEC). That means the company is not in compliance with listing requirements. Management is working on the report and has notified Nasdaq of the issue, explaining that it will provide further updates as it knows more.
The biggest near-term threat is probably that Triterras risks being delisted, which would make it harder for investors to trade the stock and would likely lead some of them to sell their shares. That would put downward pressure on the price in what is likely to be a less-liquid market for the shares. Investors might be trying to get out before that happens.
Image source: Getty Images.
The really big issue here, however, is that this has been a long-running issue. The story goes all the way back to January, when a short-seller released a report suggesting that the company had engaged in questionable related-party transactions and that its customer-use numbers might have been inflated. Triterras replied strongly at the time, saying that the claims were not true.
That said, the company's board did begin an audit to make sure that everything was indeed as it should be. In late October, the board announced that it had concluded the audit and found nothing wrong. The stock rallied, as you might expect.
However the company also noted that it was delaying the release of its annual report. It was given approval from Nasdaq for this, with a Nov. 1 due date. The company missed that date (leading to a material stock price decline) and was granted an extension until Dec. 1. It missed that date, too. And now it is in the process of asking for yet another extension, with no clear indication as to whether or not Nasdaq will be willing to grant it.
Doing an audit is not an easy or quick task, but missing multiple deadlines isn't a particularly good sign, either, and investors are clearly getting more and more worried. That's entirely understandable.
Now what
Blockchain technology is extremely exciting, and Triterras is offering a unique product based on that technology, so there's a reason for investors to be interested in the stock. However, given the ongoing saga with the company's Form 20-F, most investors should probably be on the sidelines here. And that should probably remain the case until the annual report is filed with the SEC.
Even if the company is granted another extension by Nasdaq, that won't really change the big-picture problem right now.
