RICHMOND, Va. -- As Richmond voters are getting another chance to approve or reject a casino, one of the companies behind the project has been flagged for financial reporting irregularities which could result in its removal from the stock exchange.
Urban One, the Maryland-based company backing the "Richmond Grand Resort and Casino" in partnership with Kentucky-based Churchill Downs, was notified on Friday that the Nasdaq stock market has initiated the process to possibly delist the company.
The action followed Urban One's failures to comply with financial reporting requirements as mandated by the federal government.
"In general, when a company gets a delisting notice or gets put on notice that they're potentially going to be delisted, that means that it's sort of the end of the line of a series of missteps over the past six or seven months," said Jamie Cox, a managing partner with Harris Financial Group.
Cox explained that financial reporting procedures are in place to protect investors and their decisions on whether or not to invest in certain companies.
"It's an important feature of markets in the United States to have that trust and competence that financial statements are timely filed and accurate," Cox said.
According to information on Urban One's website, the first notification of noncompliance from Nasdaq arrived in April when Urban One missed the deadline for filing its 2022 annual financial report. The company then received another notice of noncompliance in May when Uban One missed the deadline for filing its first quarter report of 2023.
The company submitted a plan to Nasdaq in an effort to regain compliance. The plan included filing its delinquent reports by September 27, which was considered an extension. However, Urban One missed that deadline too which prompted the initiation of the delisting process.
Cox said while there are sometimes reasonable explanations for falling into noncompliance, it is unusual.
“Filing financial statements, and doing it timely, is not something that most publicly traded companies have difficulty with," Cox said. “And that's not to say that any one company should be taken as guilty until proven innocent, but it certainly does make an investor wonder whether or not that company has some issues that are beneath the surface that may not have been previously disclosed.”
Urban One attributed the reporting delays to accounting errors pertaining to its investment in a Richmond Casino in 2021 and errors "with regard to the timing of expense recognition of non-cash stock based compensation."
The company has requested a hearing before the Nasdaq Hearing Panels, which will suspend any delisting action until at least October 20, and the company could be granted an extension through March 23.
In a statement to CBS 6, an Urban One spokesperson said the company was working diligently to complete the filings and regain compliance.
"This event does not impact our day-to-day business. We remain in a strong financial position and last week updated our financial guidance for the year," the spokesperson said. "Our commitment to our investors, to our millions of viewers and listeners and to our Richmond resort casino project remain unchanged."
As to whether delisting could potentially impact the casino project, Cox said it could affect financing considerations and investor confidence.
"It does really raise a lot of red flags when you have this type of reporting irregularity for such an extended period... This is not something that just came up yesterday," Cox said. "What it does is it shines a big bright light on the project as a whole, because one of the major players is having difficulty with its financial reporting, and one way or another, that's not a good thing."
However, he added that it appears the company is taking action to address the concerns.
For example, in July, Urban One dismissed the company's former public accounting firm.
"It's not like the company is sitting there doing nothing. They're trying their best to make the case that there was some legitimate reason for the issues at hand, and we all hope that that's the case," Cox said.
CBS 6 also reached out to a public relations representative for Richmond Grand requesting a comment from Churchill Downs, but a spokesperson said since the matter "does not have any bearing" on the casino project or the referendum, all questions should be directed to Urban One.
This is a developing story, so anyone with more information can email newstips@wtvr.com to send a tip.
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