Only 14 days left until INSP's Delisting Notice?
Perhaps someone else will "unplug the server."
I heard that Jain appeared on Fox News yesterday afternoon. And today the stock not only once again hit its all-time low price of $.71/share, but for the first time in the entire history of the company, it actually closed at that all-time low, setting a brand new low closing price of just 71 pennies. During Jain's TV appearance, apparently he said something to the effect, "Smart investors should probably be buying shares now, while it's undervalued."
Geesh Jain, how about you and a few of your INSP executive buddies and BOD cohorts pick up a few million shares yourselves, at these incredibly depressed levels, if it's currently at such an "undervalued" price? Especially now that you've all just recently terminated your "normal portfolio diversification" insider selling programs...at least for the next 6 months? Or how about this? Have the company buy back say about 100 million shares, and retire them? Although, I'm sure you're saving what's left of Paul Allen's huge cash investment in GNET that INSP now has in its coffers, for some future "strategic investments." Remember during the recent shareholders meeting how you bragged about what a great deal in was for INSP to be able to buy out and retire Paul Allen's 22 million shares, purchasing his shares at such a great price of ONLY $1.04 per share, and well below the $1.41 that INSP closed at the day you bought out and retired ALL of Paul's shares. If THAT price was such a great investment for INSP just a few short months ago, why isn't $.71/share a hell of a lot better deal for the company? And it would reduce some of the relatively HUGE "float" of this now dinky little company. That is, if you truly believe "smart investors should be buying now, at these undervalued prices?" Anybody out there buying that, except perhaps the dozens of unpaid (?) "touts" still hyping the heck out of this stock 24/7, over on the yahoos INSP board? Well, I guess so far Wall Street still thinks it's priced just about right...but of course tomorrow is another day.
I suppose the only good news for this company today was that the stock's price loss, following Jain's TV appearance, didn't turn out to be nearly the massive drop that some have suggested has often happened in the past, following one of his infamous media performances. And I do wish someone (perhaps Tammy) would quietly take Jain aside, and very tactfully teach him how to pronounce the word "technology," with which he loves to "pepper" his speeches. Naveen, it's roughly pronounced...tek-NAL-uh-gee.
According to my records, INSP first closed below $1/share on May 3, 2002. It has closed below $1 every day since then, except for just three days (May 16, 17, 18), which immediately followed INSP's May 15th. press release...that was announced by the company just two trading days before their annual shareholders meeting, held on May 20. That press release stated, for the first quarter 2002 they had been "pro forma" profitable in two of their three "business units." Ironically, there was no mention of what I believe they once referred to as a fourth business unit..."Broadband." You don't hear much about that from the company anymore. Did another one bite the dust? Oh, I almost forgot, they now report "Merchant/Broadband" as a single combined business unit. How very convenient for them. No need to separately mention another money-losing business unit, by now linking it with one that ONLY LOSES MONEY if you DON'T refer to GAAP accounting methods...and it thus looks really swell in a (combined "business unit") "pro forma" press release.
So anyway, the last day INSP closed above $1 was on May 20th. (closing at $1.03), strangely on the actual date of the shareholders meeting. However, there were three other days, following that date, that the share price briefly touched over $1 sometime during the trading day (May 21, 22, and 28), but still closed below $1 on those days.
Trying to be extremely conservative, and not knowing the precise intra-day trading requirements before Nasdaq Delisting process actually kicks in, I have started my count on May 29, 2000. Not a single moment on (or since) that date has the stock reached (or even briefly touched during the trading day) $1/share or above.
Thus, by my "conservative" counting method, today is number sixteen of the 30-day Delisting notice countdown, having a share price continually trading below $1/share (starting May 29). If INSP is still trading below $1 through June 27th. (the 30th consecutive day, and just 14 days from today), then just two short weeks from tomorrow (on June 28) they should be eligible to receive a Delisting notice from the Nasdaq.
Perhaps it's time for INSP to issue yet another of its famous press releases, which needs to be so good and "upbeat" that it provides for a AT LEAST a 29 penny bounce (41%) up in the stock's price, so the Nasdaq Delisting clock can begin all over again...and again...and yet again.
Maybe INSP should announce something so absolutely staggering, like a brand new "patent" and infrastructure technology, that with a single secret button pushed on any wireless device, it would directly send a super-secret silent highest-priority emergency alert call to all local police agencies, the FBI, the CIA, John Ashcroft, Bill Reilly of Fox News, and of course the Pope himself. These top secret devices containing this revolutionary new technology would be provided, on an initial trial "beta" test basis, exclusively to Roman Catholic altar boys. Talk about a world-altering wireless Jihad! I can picture Jain announcing it all now...in an interview with Maria Bartiroma on CNBC. Although, somebody better first check if anyone in her family is, or ever has been, a Catholic priest. :)
I came across the following article, which seems to clearly explain the Nasdaq Delisting process:
ebglaw.com
Understanding and Avoiding a Nasdaq Delisting
April 2001
Gabor Garai
Some recent high-profile delistings in the dot-com sector have made high technology companies nervous that they, too, will receive delisting notices from Nasdaq. Fueling this fear is a lack of understanding of what triggers a delisting and what constructive steps companies can take to avoid them.
Q. What triggers a Nasdaq delisting?
Companies are listed on either the Nasdaq National Market or the Nasdaq Small Cap Market. The delisting criteria are different for each. For the National Market, there are two alternative sets of standards a company must meet all of the criteria within one set of standards. The table below summarizes the standards.
(see Table, in link above)
Some explanatory comments
(Re: Table, in link above):
1. The total assets / total revenues test under National Market Standard 2 and the net income test under the Small Cap Standard can be met for the most recent fiscal year, or for two of the last three fiscal years.
2. Failure to maintain a $1.00 minimum bid price for 30 consecutive days (note: this is bid price, not trade price) will trigger a notice from Nasdaq. Nasdaq continually monitors bid prices, and this is one of the most common ways that it begins the delisting process.
3. Nasdaq rules emphasizes that the criteria summarized in the preceding table are only some of the measures used to determine continued listing eligibility. Nasdaq has substantial discretion to delist a company if it deems appropriate in order to maintain quality and public confidence in its market.
Q. What steps can a company take to avoid a delisting?
Clearly, the best course is to work to avoid the problem well before failing to meet one of Nasdaq's requirements.
Companies often ignore the market maker standard, for example, even though it is the easiest one to control. If a company receives notice that its market maker is pulling out, it can work to find new ones. A company doesn't have to retain a market maker from the most prestigious market maker to meet the Nasdaq requirements.
When a company's value is sinking, it's important to ask, "What is the market saying?" Usually the market is fearful that a company won't survive. It's useful then for a company to raise funds to reinvigorate investors' confidence in the company's viability and to demonstrate that other investors are willing to put more money into the company.
It1s also a good time for a company to evaluate the effectiveness of its investor relations efforts. Companies must be cautious, however, that they are not violating SEC rules against selective disclosure and forward-looking statements.
Q. Will a reverse stock split correct the $1 minimum bid problem?
This is an untested strategy, and no one knows if it truly works. If a company decides to do a reverse stock split, it's important to do it before the bid price falls below $1. If the company does the reverse split at $2 or $3, it can use other business reasons to justify the measure. And more significantly, once the bid falls below $1, there often isn't enough time to complete a reverse split, which can take three to four months to complete. A reverse split requires a proxy statement, SEC approval, and in many cases the approval of the majority of all shareholders not just those shareholders who vote. Getting half of all shareholders to vote is a time-consuming a difficult task.
Another consideration is how many shares a company has outstanding. If after the reverse split there are fewer than a couple of million of publicly traded shares (i.e. public float), the company would not have adequate trading volume in its shares.
Q. How does a company respond to a notice that its stock may be delisted?
The first step is to write an informal letter to Nasdaq citing the steps the company has taken to correct the underlying business reasons for the decline in stock value. If the delisting letter refers to a failure to meet the minimum bid price of public float requirement, the company has 90 days prior to the time that the delisting actually takes effect to correct this failure. During that time, if the bid price or public float requirement is met for ten or more consecutive days, the decision of Nasdaq to seek delisting might be reversed again, in the discretion of the Nasdaq staff. If the company is unable to persuade Nasdaq to stop the delisting process, a formal delisting order will issue. This order can then be appealed and final delisting can be delayed until the appeal is completed.
If a company receives a letter notifying it that the minimum bid price has not been met, and the company believes that during the 90 days after receipt of that notice it can show significantly improved performance, it is worth seeking an informal review of the Nasdaq decision. However, it is important to be aware that during the review, Nasdaq will examine market capitalization, net income, market maker support and net tangible assets. If the company is not meeting those criteria, it may be ill advised to move forward with an appeal.
Q. What happens if a company is delisted?
At that point, the company is traded on the "pink sheets" stocks that are not listed in the newspapers and are not easy to follow. These stocks are of no interest to institutional investors and tend to attract individual investors and the bottom feeders of the investment world.
Companies can be listed on Nasdaq. However, once a company is delisted, it must meet the initial listing requirements for either the National Market or the Small Cap Market, both of which are more stringent than the continued listing requirements outlined above. Moreover, Nasdaq will likely scrutinize the new listing application with care to determine whether the company has indeed turned its business around. Again, beyond the objective criteria, Nasdaq can apply a substantial measure of discretion.
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Please feel free to contact Gabor Garai at 617/342-4000 in the firm's Boston office if you have any questions or comments. Mr. Garai's e-mail address is ggarai@ebglaw.com.
This publication is provided by Epstein Becker & Green, P.C. for general information purposes; it is not and should not be used as a substitute for legal advice.
Copyright 2000 © Epstein Becker & Green, P.C. All Rights Reserved.
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