Southland Stock Trading Halted
Federal securities regulators Wednesday suspended trading in the stock of Santa Ana-based Southland Communications for 10 days because of questions regarding the ownership and volatile trading of company shares.
The Securities and Exchange Commission said it stopped the trading of the paging services company’s stock because of “questions concerning a possible, undisclosed change in control of the company” and “the identity of the owners of its common and preferred stock.”
The agency also cited “questions concerning recent market activity in those securities” and “questions concerning an accumulation of over 25% of the company’s outstanding common stock and approximately 19% of the company’s outstanding preferred stock by several broker-dealers and certain . . . customers.”
Southland’s stock was trading at $16.75 a share bid before the suspension, up 86% from $9 on March 1. The stock, which is traded Over-The-Counter, is to resume trading on April 16.
Ahmad Bayaa, Southland president, was not available for comment.
In a statement on March 14, Bayaa said that about 15,000 shares of the company’s stock are traded on a normal day. He said the company had no idea why volume had jumped recently as high as hundreds of thousands of shares a day.
But one broker, who had a minor position at Southland and who asked not to be identified, described the trading activity as a “classic short squeeze.”
Under such a scenario, Wall Street brokers who sold the stock short--borrowing the shares and selling them, speculating that they could replace the borrowed stock with cheaper shares later--can expect to lose money.
Instead of falling, the price of Southland stock rose. That forced short sellers to cover their positions with more expensive shares, further escalating the increase in stock prices. Such a squeeze is ended either by taking losses or, in this case, regulatory action.
SEC officials would not comment beyond their terse statement about the trading halt. The agency did not identify broker-dealers or their customers who are suspected of accumulating large stakes without disclosing it publicly.
The SEC requires shareholders who own more than 5% of a public company’s stock to file a notice with the agency. No such records were on file as of Wednesday.
As of October, 1989, Bayaa was the company’s largest shareholder with 920,000 shares of the company’s 2.4 million shares. His brother, Ziad Bayaa, owned 80,000 shares.
The company’s financial performance isn’t driving the trading. For the first quarter ended Jan. 31, Southland lost $324,000 on revenue of $1.9 million, compared to a loss of $259,000 on revenue of $1.4 million a year earlier.
Southland, which provides electronics paging services for individual and business subscribers, does business in Orange County as National Paging Co. It was founded in 1981 and went public in 1987 with the help of Kirk Knapp & Co. in Grand Rapids, Mich.
