thestreet article astn delisting
ya, nasdaq is going to try and save one of the weakest companies out there.
thestreet.com
Playing Nasdaq Limbo -- How Low Can You Go
By K.C. Swanson
Staff Reporter
8/15/01 12:15 PM ET
Nearly 18 months into a deep market correction, hundreds of Nasdaq stocks remain at risk of delisting as their stock prices drift closer and closer toward oblivion. But despite collapsed share prices, deflated market caps and anemic revenue, many haven't yet gotten the final boot.
Based on criteria provided by TheStreet.com, financial research service FactSet Research Systems found that 176 Nasdaq stocks have traded below $1 for at least 30 consecutive days. In fact, the number of stocks delisted for not complying with the Nasdaq's rules this year already has passed the number for all of 2000.
According to the Nasdaq's rules, those 176 stocks are in imminent risk of being delisted. But don't expect that to happen anytime soon. Notwithstanding the 30-day rule, the delisting process can take up to seven months for Nasdaq member companies, as companies invoke their right to a hearing and subsequent appeal. For that matter, it isn't in the exchange's interest to rush delisting, because it derives a big piece of its revenue from transactions -- with fewer member companies, transactions would decrease.
Plus, there's no shortage of investor interest in seemingly washed-up tech stocks, despite the sharp drop in share prices. Though the total dollar volume on the Nasdaq dropped by nearly 40% in the second quarter from the same period a year ago, the total share volume actually increased by 22%.
In fact, many of the Nasdaq stocks at risk of delisting still generate surprisingly high trading volumes, given their precarious business positions. Though dollar volume on the stocks may be low because of their weak prices, their sheer trading volume may be higher than some of their blue-chip counterparts.
Consider Razorfish (RAZF:Nasdaq - news - commentary - research), the unprofitable IT consulting outfit listed on the Nasdaq, which closed Monday at 36 cents. Its daily trading volume of 2,781,400 that day easily surpassed that of established, profitable big shots like McDonald's, CVS, Freddie Mac, and Caterpillar.
Though Razorfish stands out for especially high volume, other Nasdaq members at risk of delisting have also seen relatively high trading activity. A sampling of under-$1 Nasdaq stocks with 250,000 to over 800,000 shares changing hands daily would include Onvia.com (ONVI:Nasdaq - news - commentary - research), Corecomm (COMM:Nasdaq - news - commentary - research), and Netcentives (NCNT:Nasdaq - news - commentary - research) -- though their closing prices on Monday ranged from a high of 43 cents for Onvia to a low of 9 cents for Netcentives.
Why so much interest in a bunch of companies that are practically on life support? "People generally like low-priced stocks," says Jody Eisenman, president of Perrin Holden and Davenport Capital, a retail brokerage and investment bank. "They would rather own 1,000 shares of a $20 stock than 250 shares of an $80 stock, and I think that's why there's more trading volume in lower-priced stocks."
Beyond Nasdaq: the Floating World
Despite the Nasdaq's demonstrated patience with some of its weaker members, a raft of companies have lost their listing already this year, mostly because their stock prices dropped too low for too long. By the end of this July, the number of delistings based on regulatory noncompliance had already surpassed the number for all of 2000, at 279 for the year to date compared to 240 last year.
Of the 279 issues booted off the Nasdaq so far, 167 were delisted because the stock price slid too low. Another 47 occurred because either the market cap or the market value of the public float had dropped below the minimum requirement.
But in some cases, tech stocks have continued to draw attention even after they've lost their Nasdaq listing and ended up on less respected exchanges. Take NorthPoint Communications, which got bounced off the Nasdaq back in February after it announced a bankruptcy reorganization, and landed on the NASD-operated OTC Bulletin Board. Though it was changing hands Tuesday at a mere 12 cents, it claimed trading volume of 743,700.
Same goes for fellow DSL provider Covad Communications Group, which recently said it would file for Chapter 11. It was trading Tuesday at 58 cents on the OTC on volume of 576,500.
Much of the trading in such stocks is probably undertaken by market makers and daytraders, suggests Eisenman, since brokers typically aren't allowed to recommend OTC stocks to their retail clients.
But there are still retail investors who, despite all evidence to the contrary, hold out hope of a rebound for the handful of discredited stocks worth pennies. "There's always going to be a certain percentage of investors attracted by the fact that they can buy several shares at a low price," says Rodney Gray, a broker at Legg Mason Wood Walker in Alexandria, Va. "And there are always certain individuals who have purchased a stock at a higher price, and they become married to it."
Gray tries to steer clients away from shares listed on the OTC, given the less stringent listing standards and lower liquidity on the exchange, and discourages purchases of super-cheap stocks. "If a stock is trading for less than $5 a share, there's definitely a reason why," he says.
... The Un-salesworthy...
The weakest 10 Nasdaq stocks, by net sales*
Stock Net sales
(in millions) Price Market value
(in millions) Shareholders' Equity (in millions)
Authoriszor $0.1 $0.20 $3.691 $16.2
Vsource 0.3 0.26 4.853 5.8
Healthwatch 0.3 0.435 2.262 4.0
Ashton Technology Group 0.4 0.74 24.552 3.3
DF China Technology 0.8 0.265 4.131 28.7
Enchira Biotech 0.8 0.85 7.878 12.6
First Ecom.com 0.9 0.46 8.837 33.2
Be 0.9 0.53 19.405 4.7
Barpoint.com 0.9 0.28 4.802 32.7
PASW 1.0 0.14 0.632 0.2
* Out of Nasdaq common stocks that have traded at less than $1 for the last 30 trading days, as of 8/9/2001.
Source: Market Guide via FactSet Research Systems.
they had 3.3, need 10.
nasdaq.com |
