Nasdaq Board May Waive $1 Minimum Requirement
Tuesday, January 28, 2003
NEW YORK — The board of the Nasdaq Stock Market Inc. is expected to vote Wednesday on whether to waive, even if only temporarily, its $1 minimum listing requirement, giving hundreds of companies more time to prop up their share prices to avoid being delisted.
Such a decision by the No. 2 U.S. stock market would be welcomed by numerous technology and telecom firms, including Sonic Foundry Inc. .
In April of 2000, software and digital media firm Sonic Foundry moved its common stock from the American Stock Exchange to the Nasdaq, looking to be closer to other technology firms.
Now, Sonic Foundry is faced with losing its Nasdaq address as its shares wallow below $1.00. Sonic is appealing Nasdaq's decision to delist its shares from the National Market.
If Nasdaq denies the appeal, Sonic said it would explore listing its shares on the SmallCap Market or attempting a reverse stock split to boost its share price -- or maybe both.
But a decision to waive the requirement could mean that Sonic would not have to do either.
To stay listed on Nasdaq companies must meet a variety requirements, including keeping share price above $1.00.
If a stock closes below $1.00 for 30 straight trading days, the Nasdaq will notify the company that it faces delisting and has 90 calendar days to try to get its shares above $1.00 for 10 consecutive business days. If a company fails to do so, it can be delisted from the National Market System.
Rather than completely scrapping the minimum $1.00 requirement, the board may likely vote to increase the amount of time firms have to raise their share price. For instance, companies listed on the SmallCap Market are given 180 days, and sometimes even longer, to try to regain compliance.
After the Sept. 11, 2001 attacks on the World Trade Center shuttered U.S. equity markets for four days, Nasdaq temporarily waved its minimum listing requirements for three months.
"A temporary waiver of this issue is something that would go a long way to helping us out," said Sonic Foundry Chief Financial Officer Ken Minor.
The Nasdaq could not be reached for comment.
Nasdaq Chairman Hardwick Simmons floated the idea last October as the market downturn and telecom and technology bust left hundreds of Nasdaq-listed firms with share prices of less than $1.00.
Simmons said 13 percent of Nasdaq's 3,800 companies traded at that depressed level, even though many had "real balance sheets, with real business plans."
Companies that get delisted face moving their shares to the SmallCap Market, the Over-the-Counter Bulletin Board market, or the Pink Sheets where analyst coverage is scarce and shares can be sparsely traded.
"I think you really get lost," Minor said of a move to the over-the-counter bulletin-board. "You're just not going to get very much liquidity at that point."
Delisting companies also means that Nasdaq loses revenue from listing those companies.
"I'm not sure it's necessarily good over the long term," Louis Thompson, president of The National Investor Relations Institute, said of waiving the minimum listing requirement.
"But, it may be necessary in the short term given that there are companies that a year ago or more you wouldn't believe that they would be trading around the dollar level."
Last October, Sang Lee, an analyst with Celent Communications, said the move could be a knee-jerk reaction to market conditions.
But in a recent interview Lee said: "I think it's still short-sighted." But, he added: "Perhaps if the market conditions persist in this way, it may not be that short sighted."
However, if the market does come back, the Nasdaq can always change its listing standards again, he said. |
