Shares in Tile Shop Holdings Inc. return to the main Nasdaq Stock Market on Thursday, nearly 20 months after the Plymouth-based retailer purposely delisted itself.
The delisting, which shifted the trading of Tile Shop shares to the over-the-counter market, surprised investors and prompted a class-action suit that eventually led the company to agree to a $12 million settlement.
Many institutional investors are barred from owning shares in firms that are not on the main trading boards of stock exchanges like Nasdaq. Financial disclosure requirements are less strict, and reporting costs are lower, for companies that are traded over the counter.
Tile Shop shares for several months in 2019 traded below the $5 threshold considered a minimum for Nasdaq when directors prodded executives into the delisting. But institutional investors dropped Tile Shop from their portfolios on the day in October 2019 when the delisting was announced, causing the stock to lose two-thirds of its value.
Then, two directors began to buy Tile Shop shares at the lower price, which prompted other shareholders to sue the company. A judge in November 2019 ordered the directors to stop their share purchases, which had boosted their collective stake in the firm to around 30% from 17%. The dispute settled last summer with a $12 million payout from Tile Shop's insurers to shareholders.
The pandemic initially forced Tile Shop to close its chain of 143 stores. But they eventually reopened as governors around the country deemed construction-related businesses to be essential services.
Tile Shop ran the stores with fewer employees and at reduced hours, allowing it to trim costs. Sales began to rise as many consumers, forced to spend more time at home, decided to undertake remodeling projects.
At the end of the fiscal year that finished in February, Tile Shop was solidly profitable, had eliminated all of its debt and had cash on hand. Its share value, which traded below $1 at the start of the pandemic, climbed above $4 at the end of 2020 and to around $7 this spring.
That turnaround led to new shareholder pressure on the company's executives and board to return the stock to the main Nasdaq and attract institutional investors again. The board in March agreed to apply, and Tile Shop received approval from Nasdaq earlier this week.
A company spokesman declined comment Wednesday. The company's shares closed the day at $8.36, down 6 cents, on the last day of over-the-counter trading.
