Codere Online's Nasdaq delisting threat looms amid auditor change, potential class action lawsuit

Online gaming operator Codere Online is grappling with multiple challenges, including a recent change in auditor, allegations of securities fraud, and a looming Nasdaq delisting threat. The company has initiated efforts to regain compliance, appointing a new auditor and preparing for an appeal hearing later this month.  

Marcum LLP, Codere Online’s auditor, resigned on December 20, citing an inability to complete necessary audit procedures due to IT general control deficiencies in the company’s third-party platforms and insufficient internal controls over financial reporting. The company subsequently appointed MaloneBailey, LLP as its independent auditor on December 31 to handle audits for fiscal years 2023 and 2024.  

Codere had previously disclosed material weaknesses in internal controls in 2021 and 2022, including inadequate technical accounting expertise and weak oversight of outsourced processes and cybersecurity measures managed by its parent, the Codere Group.  

Codere received a Nasdaq delisting notification for failing to file its Form 20-F for 2023. The company faces a crucial hearing on January 16 to seek an extension and regain compliance. If granted, Codere would have until May 12, 2025, to complete its delayed filings for fiscal years 2023 and 2024.  

The company’s stock has come under pressure, dropping over 9% in the past week and 20% in the past month, currently trading at $6.38. Despite the recent decline, Codere shares were up 113.95% by late December, which made it one of the top-performing gaming stocks of 2024.  

Adding to its woes, law firm Pomerantz LLP has launched an investigation into potential securities fraud and unlawful business practices at Codere Online. The announcement followed Marcum’s resignation, which caused Codere’s share price to decline 3.84% on the same day.  
  
Despite the challenges, analysts remain cautiously optimistic about Codere’s ability to address its compliance issues. Jeffrey Stantial, Stifel Analyst, said: “We remain somewhat optimistic CDRO will resolve the delayed filing by the requested 5/12/2025 extension date, though acknowledging the challenging time constraint.” 

However, the specter of delisting looms large. A Nasdaq delisting would force Codere Online to trade over-the-counter, likely diminishing its appeal among professional investors and negatively impacting its valuation.  

Codere’s valuation and market confidence hinge on its ability to regain compliance with Nasdaq’s Listing Rule 5250(c)(1), also known as the “public reporting rule.” The company’s current market capitalization stands at $306.67 million.