Zentek Ltd.: Navigating Nasdaq Compliance and the Path to Shareholder Value

Zentek Ltd. (Nasdaq: ZTEK) faces a critical juncture as it grapples with Nasdaq's minimum bid price requirement. The company's stock has languished below $1.00 for 31 consecutive business days, triggering a compliance review under Nasdaq Listing Rule 5550(a)(2). While the delisting threat is not immediate, the clock is ticking: Zentek must achieve a closing bid price of $1.00 for 10 consecutive days by February 23, 2026, or risk a potential delisting. This situation raises urgent questions about the feasibility of a reverse stock split and the broader strategic implications for long-term shareholder value.

The Reverse Stock Split: A Quick Fix with Lingering Risks

A reverse stock split is a common remedy for companies facing delisting due to low share prices. By reducing the number of outstanding shares, Zentek could artificially inflate its per-share price to meet Nasdaq's threshold. For example, a 1-for-5 reverse split would elevate the current bid price of $0.68 to $3.40, assuming no change in market capitalization. However, this solution is not without drawbacks.

First, a reverse split could alienate retail and institutional investors, who often perceive such moves as a sign of desperation. Historical data shows that companies implementing reverse splits frequently experience further declines in liquidity and investor confidence. Second, Zentek's recent financial performance—while showing a 14,032% surge in Q4 2025 revenue—still reflects a net loss of $1.84 million for the same period. A reverse split might delay the inevitable but would not address underlying operational inefficiencies or cash flow challenges.

Operational Turnaround: A Bolder, More Sustainable Path

A more enduring solution lies in a strategic operational turnaround. Zentek's pivot from mineral exploration to commercializing its ZenGUARD™ antimicrobial technology offers a compelling narrative. The company has secured partnerships with VMedCare, Southmedic, and Henry Schein, positioning its products in high-growth sectors like PPE and HVAC filtration. Independent testing has validated ZenGUARD™'s ability to enhance filtration efficiency without compromising airflow, a critical differentiator in a competitive market.

However, scaling these initiatives requires capital and execution discipline. Zentek's Q2 2025 financials reveal a free cash flow deficit of $6.28 million and a dwindling cash reserve of $121,480. To fund expansion, the company must either secure additional financing or generate sufficient revenue from its ZenGUARD™ product line. The latter hinges on successful regulatory approvals, such as the pending 510(k) application for surgical masks with the U.S. FDA.

A key advantage of an operational turnaround is its alignment with long-term value creation. By focusing on revenue growth and profitability, Zentek can avoid the stigma of a reverse split and instead demonstrate its ability to innovate and capture market share. For instance, the company's partnership with 1Click Heating and Cooling Inc. to distribute MERV 9 filters could unlock new revenue streams in the HVAC sector, a market projected to grow significantly in the coming years.

Strategic Considerations and Investor Implications

Zentek's leadership transition adds another layer of complexity. CEO Greg Fenton's departure after March 31, 2026, necessitates a seamless handover to a leader capable of steering the company through its commercialization phase. The board's emphasis on finding a successor who can “drive the transition from R&D to commercialization” is a positive signal, but execution will be paramount.

For investors, the decision to hold or divest from ZTEK depends on their risk tolerance and time horizon. A reverse stock split might provide short-term relief but could erode trust in the company's management and long-term prospects. Conversely, a successful operational turnaround—marked by improved cash flow, regulatory approvals, and scalable partnerships—could unlock substantial value.

Conclusion: Balancing Urgency with Vision

Zentek Ltd. stands at a crossroads. A reverse stock split offers a quick fix to avoid delisting but risks undermining investor confidence. An operational turnaround, while more challenging, aligns with the company's strategic shift toward commercializing high-value technologies. Given Zentek's recent revenue growth and promising partnerships, the latter path appears more sustainable. Investors should monitor the company's ability to execute on its commercialization plans, secure regulatory approvals, and maintain liquidity. For those willing to bet on innovation, ZTEK's journey could yield significant rewards—but patience and a clear-eyed assessment of risks will be essential.