How likely is the Nasdaq deficiency notice to trigger a delisting or forced reverse split, and what are the potential consequences for market access and institutional ownership?

Likelihood of a delisting or forced reverse‑split – Nasdaq gives a delinquent filer a 90‑day cure period to bring the 10‑Q and the overdue 10‑K up to date. If DIH Holding US, Inc. (DHAI) can file the reports within that window (or secure a brief extension by demonstrating a concrete filing plan), the deficiency will be lifted and a delisting is unlikely. Historically, only a small fraction of companies that receive a Rule 5250(c)(1) notice actually get expelled; the majority either file in time or negotiate a compliance extension. A forced reverse split, however, is not a standard Nasdaq remedy for filing delays—it is only considered when a security’s price falls below the $1 minimum or when market‑cap requirements are breached. At the time of the notice there is no mention of price‑related non‑compliance, so a reverse split would be a secondary risk, contingent on a future price collapse rather than the filing issue itself.

Consequences for market access and institutional ownership – While the deficiency remains open, DHAI’s shares are traded under a “deficiency” flag, which can deter large institutional investors that have strict compliance screens; many mutual funds and ETFs will automatically exclude a company flagged for non‑compliance. Liquidity may dry up as market makers tighten spreads, and the ticker could be moved to the Nasdaq Capital Market or, in the worst case, to the OTC Pink tier if the issue is not resolved. A delisting or a move to OTC would substantially raise the cost of capital and could trigger covenants in existing debt agreements. From a trading standpoint, the prudent approach is to treat the stock as a high‑risk, short‑term play: consider a protective stop or limit exposure to a small position until the filings are confirmed, and monitor Nasdaq’s compliance updates closely. If the company files within the cure period, the risk premium should compress quickly, offering a potential bounce; failure to cure will likely precipitate a sharp sell‑off and a prolonged period of illiquidity.