OverviewBoard Discretion to Implement the Reverse Stock Split
The Board believes that stockholder approval of a range of ratios (as opposed to a single reverse stock split ratio) is in the best interests of our Company and stockholders because it is not possible to predict market conditions at the time that the reverse stock split would be effected. We have significantly evolvedbelieve that a range of reverse stock split ratios provides us with the most flexibility to achieve the desired results of the reverse stock split. The reverse stock split ratio to be selected by our business overBoard will be a whole number in a range of 1-for-5 to 1-for-30. The Board can only authorize the past several years, particularly driving efficiencies in filing of one reverse stock split amendment and all other reverse stock split Amendments will be abandoned. The Board also has the authority to abandon all reverse stock split Amendments.
In determining the reverse stock split ratio and whether and when to effect the reverse stock split following the receipt of stockholder approval, the Board may consider a number of factors, including, without limitation:
our fulfillment costsability to maintain the listing of our Class A common stock on The Nasdaq Capital Market;
the historical trading price and product acquisition capital expenditures, significantly reducingtrading volume of our operating expenses,Class A common stock;
the number of shares of our Class A common stock outstanding immediately before and improving our gross margins. In addition, in fiscal year 2022, we made improvements across our technology stack, including completing our migrationafter the reverse stock split;
the dilutive impact of any potential exercise of the Company’s outstanding warrants to purchase Class A common stock and the cloud, to enable greater scale, enhanced resiliency and faster site speed. The successful transformation in these areas is the result of enormous effortsrelated impact on the parttrading price of the Company’s Class A common stock;
the then-prevailing trading price and trading volume of our employees, who have remained dedicated throughout these changesClass A common stock and throughthe anticipated impact of the reverse stock split on the trading price and trading volume of our September 2022 restructuring. Our team has executed well despiteClass A common stock;
the anticipated impact of a challengingparticular ratio on the number of holders of our Class A common stock; and volatile macroeconomic environment and we remain focused on driving growth and profitability for the business.
prevailing general market conditions.
We believe we can drive future growth by investing in and improvingthat granting the customer experience. Our goalBoard the authority to set the ratio for the reverse stock split is essential because it allows us to make customers’ time spent with Rent the Runway as efficient and delightful as possibletake these factors into consideration and to continuereact to investchanging market conditions. If our Board chooses to implement the reverse stock split, we will make a public announcement regarding the determination of the reverse stock split ratio.
Risks Associated with the Reverse Stock Split
There are risks associated with the reverse stock split, including that the reverse stock split may not result in a sustained increase in the per share price of our Class A common stock. There is no assurance that:
The market price per share of our Class A common stock after the reverse stock split will rise in proportion to the reduction in the number of shares of our Class A common stock outstanding before the reverse stock split;
The reverse stock split will result in a per share price that will increase the level of investment in our customer value proposition. We are focused on three strategic pillars for growthClass A common stock by institutional investors or increase analyst and broker interest in 2023:our Company;
Inventory She Wants, When She Wants It: Enhancing the availabilityThe reverse stock split will result in a per share price that will increase our ability to attract and retain employees and other service providers; and
The market price per share will either exceed or remain in excess of the items$1.00 minimum bid price as required by Nasdaq, or that we will otherwise meet the requirements of Nasdaq for continued inclusion for trading on our site and increasingThe Nasdaq Capital Market.
Stockholders should note that the depth of our buys.
Best in Class Product Discovery: Prioritizing search and discovery features and tools to make finding that perfect item a more efficient, engaging and fun experience.
Efficient and Easy-to-Use Experience: Providing additional onboarding support for new subscribers and improving the performance of our website, mobile site and mobile application, including increasing site speed and reliability.
We plan to introduce additional features, tools, and enhancements in support of these strategic pillars throughout fiscal year 2023. For example, in March 2023 we changed our subscription programs to offer to customers an additional item per order for the same price.
To execute on our initiatives effectively, we believe that it’s vital to incentivize our employees as we continue to execute on our strategic business initiatives, and we believe that it’s important to reward these employees for their efforts to date.
We have historically viewed equity compensation, particularly the usage of stock options, as an important part of our compensation program. However, as a resulteffect of the adverse impact of a challenging financial market on ourreverse stock price, as of April 10, 2023 over 97% of outstanding stock options held by our eligible participants had exercise prices abovesplit, if any, upon the current market price of our Class A common stock.
stock cannot be accurately predicted. In discussing strategies to address our stock options,particular, we were particularly focused on creatingcannot assure you that the price for a strategy that is compatible with the interestsshare of our stockholders. We have designedcommon stock after the Option Exchangereverse stock split will increase in proportion to reduce dilution, restore equity value, increase retention and motivationthe reduction in a competitive laborthe number of shares of our Class A common stock outstanding immediately prior to the reverse stock split. Furthermore, even if the market provide non-cash compensation incentives and alignprice of our service provider and stockholder interests for long-term value creation. Stock option awardsClass A common stock does rise following the reverse stock split, we cannot assure you that are underwater and/or perceived to bethe market price of low value are of limited benefit in motivating and retaining our talent and contribute to greater dilutive overhang. ThroughClass A common stock immediately after the Option Exchange, we believe that weproposed reverse stock split will be able to enhance long-term stockholder value by increasing our ability to retain experienced and talented personnel and motivate them to drive growthmaintained for any period of time. Even if an increased per-share price can be maintained, the reverse stock split may not achieve the desired results that have been outlined above. Moreover, because some investors may view the reverse stock split negatively, we cannot assure you that the reverse stock split will not adversely impact the market price of our company by providing meaningful equity incentives.
We evaluated several alternatives for remaining competitive within our industry and determined that the Option Exchange was the most attractive alternative for the reasons set forth below.
Stockholder approval of the Option Exchange is required under the terms of our 2019 Stock Incentive Plan (as amended from time to time, “2019 Plan”), our 2021 Plan and the Nasdaq listing rules. Although it is not required under the terms of our 2009 Stock Incentive Plan (as amended, the “2009 Plan”), as a matter of good corporate governance we have determined that it is appropriate to also obtain stockholder approval of the Option Exchange with respect to any options outstanding under the 2009 Plan. Stockholder approval of this proposal requires the affirmative vote of a majority of votes cast (excluding abstentions and broker non-votes). If our stockholders do not approve the Option Exchange, eligible options will remain outstanding in accordance with their existing terms.Class A common stock.