Hall of Fame Resort shareholders approve possible use of reverse stock split

CANTON – Shareholders have approved allowing directors of Hall of Fame Resort & Entertainment Co. to use a reverse stock split if it's needed to keep the company listed on the Nasdaq stock exchange.

Nasdaq warned Hall of Fame Resort in late May that the price of its shares had fallen below a $1 threshold, which could lead to the stock being delisted by the exchange.

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In a special meeting Thursday morning, 52.9% of shareholders who voted approved using the reverse stock split in a bid to increase the value of shares. Directors have the option to use the process, but aren't required to use it.

The company, which wants to make sure its shares continue trading on Nasdaq, had recommended that shareholders support the proposal. Hall of Fame Resort is developing the Hall of Fame Village powered by Johnson Controls, and has interests in gaming and media businesses.

A reverse stock split involves converting a number of shares into a single share, increasing the price of a share. The value of the holdings remains the same, but the number of shares is reduced. In the move approved by shareholders, Hall of Fame Resort directors can convert between 10 and 25 shares into a single share. The board has until May 5, 2023, to decide if it will use the stock split.

Hall of Fame Resort stock could be delisted

When Nasdaq warned the company in May of potentially being delisted, it gave Hall of Fame Resort 180 days — or until Nov. 21 — to have the stock price climb higher than $1 per share. Last week the company asked Nasdaq for a 180-day extension, which would give the company until mid-May to pass the $1 per share threshold.

Hall of Fame Resort can use the reverse stock split to avoid delisting, or it can hope that its shares begin trading higher than $1 per share.

To avoid being delisted, the stock would have to close at a value above $1 per share for 10 consecutive days. Hall of Fame Resort shares did close at a price higher than $1 per share several times in August, but never for more than eight consecutive days.

The share price dropped sharply after Hall of Fame Resort announced it would seek a reverse stock split. Shares were valued at 58.5 cents when trading closed on Wednesday.

Hall of Fame Village is a football-themed destination that is designed to build on the popularity of the Pro Football Hall of Fame. It now includes the DoubleTree by Hilton hotel in downtown Canton, Tom Benson Hall of Fame Stadium, a zipline, athletic fields and a sports dome. The company also plans to add a Ferris wheel, retail stores, restaurants, a Tapestry by Hilton hotel and football-themed waterpark.

The project dates to 2014, although efforts to acquire property for the project began several years earlier.

Michael Crawford and Benjamin Lee: Goal is to protect investor interests

Thursday's meeting was conducted virtually and lasted 17 minutes.

Michael Crawford, chairman, president and chief executive officer, and Benjamin Lee, chief financial officer, said in response to a shareholder's question that having the reverse stock split available would protect the interests of shareholders and the ability of the company to perform long term.

"The goal really here is by passing this proposal we have maximum flexibility to do what we need to do to maintain our listing," Lee said. "This is just another tool in the tool kit to help us ensure that we are compliant with the Nasdaq listing rules over this period, as well as the potential extension period that we applied for."

Another shareholder asked when the company would finally report a profitable quarter.

Crawford cited problems with the global pandemic, supply chain shortages, high inflation and bankers being hesitant to lend money. In spite of those issues, the company has built physical and virtual assets, expanded its business, and grown revenue each quarter.

"Over the next year to two years, we are still very much in an investment mode," Crawford said in response to the question.

Crawford said he understands that shareholders are frustrated to hear that money still must be invested.

"But if you don't build the things, you can't drive the revenue. If you can't drive the revenue, you can't drive the profitability. So it's very clear to us that our game plan is working," he said.

New lending agreement with Huntington National Bank

Following the meeting, the company filed notice with the U.S. Securities and Exchange Commission that it reached a loan agreement with Huntington National Bank.

The loan is secured by an open end mortgage and grants a first lien on the two retail buildings that are known as the Fan Engagement Zone at Hall of Fame Village. The company can borrow up to $10 million and, according to the SEC filing, the repayment is secured by Stuart Lichter, a member of Hall of Fame Resort's board.

Reach Edd at 330-580-8484 or edd.pritchard@cantonrep.com On Twitter: @epritchardREP