Nasdaq listing rule review draws fire
Sunday October 13, 1:55 pm ET
By Mary Chung in New York
The Nasdaq stock exchange's move to consider getting rid of its $1 minimum listing standard is drawing fire from some on Wall Street.
Hardwick Simmons, Nasdaq chairman, told a conference last week that he was looking at a change to the rule that all companies listed on the market should trade at more than $1 a share .
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But with nearly a fifth of all Nasdaq stocks trading below that level, critics of the second-biggest US stock market say it is buckling to the pressure of a 2-year bear market.
The market's capitalisation has fallen from more than $6bn in 2000 to less than £1.9bn.
"Allowing companies to trade below $1 skews the market, creates volatility and shows Nasdaq doesn't have the cojones to do anything but let the problem fester," said an analyst from a large brokerage.
The Nasdaq Listing and Hearing Review Council could meet as early as this week to review the $1 standard.
Sang Lee, an analyst at Celent, a research and advisory company, warned that loosening listing requirements would jeopardise Nasdaq's long-term strategy and erode its credibility.
"Cheapening its listing standards is not a good idea when Nasdaq is considered a first-tier market. Just because the stock market is down, it cannot panic and forgo its $1 requirement ."
However, with more than 700 of its 3,800 securities trading below $1, Nasdaq would face a hefty loss of revenue were it forced to kick out so many.
For some, reverse splits may be the only option to avoid delisting. But the strategy rarely benefits the company and hurts Nasdaq's revenue, because its listing fees are based on a comp any's total number of outstanding shares.
Nasdaq wants to avoid a steep drop in fees in this harsh climate.
But not everyone is against easing standards. One senior Nasdaq trader said investors would end up the biggest losers if Nasdaq did not ease the rule.
"Investors have already suffered enough. Why deprive them of all the advantages of having their company listed in a legitimate market, instead of fading into oblivion?" |
