On July 17, Aterian sold its consumer brand portfolio and brought in a new chief executive. David Lazar paid $7 million for preferred stock that, once converted, gives him 95.7% of the company. Six weeks later, Nasdaq told Aterian its stock had been below the minimum price for 30 straight trading days.
Shares closed 20.70% higher at $0.8570 on September 11, on dollar volume of about $5.2 million, the session after Lazar filed a Schedule 13D with the SEC disclosing the full terms of his stake.
For anyone holding common shares, the two facts belong together. Lazar's preferred stock can convert into about 250 million common shares. About 18 million common shares are currently outstanding. Every share created on conversion makes the ones already issued worth a smaller slice of the same company.
The investment came in two equal payments. In April, Lazar paid $3.5 million for Series AA preferred stock, each share of which converts into 7.7 common shares. Stockholders approved the second stage at a July meeting, and Lazar paid another $3.5 million for Series AAA preferred — which converts at 135.1 common shares per preferred share, the far higher rate that accounts for most of the potential new stock. In August he converted half his Series AA shares into about 6.7 million common shares, which carry voting rights. The remaining preferred generally does not.
On September 2, Nasdaq sent Aterian a bid-price deficiency notice: the stock had closed below the required $1.00 for 30 consecutive business days. The company has until March 1, 2027 to regain compliance, which requires the closing price to hold at or above $1.00 for ten consecutive business days. Stockholders approved a reverse stock split at the July meeting, according to the Schedule 13D. Under the preferred stock terms, conversion prices adjust for reverse splits, so consolidating the share count would not change Lazar's ownership share after conversion.
As of September 4, Lazar is also the company's interim chief financial officer, after the previous CFO was terminated under a transition agreement. He holds both executive roles at a company that has sold its main business, has no permanent finance chief, and must get its stock above $1.00 to stay listed — all while holding preferred stock he can convert to common at any time of his choosing.