Nasdaq Looks at Changing Delisting Rules

The Nasdaq Stock Market is considering changing its rules so the large number of firms whose stocks have fallen below $1 may not be delisted, sources said Tuesday.

There are about 670 Nasdaq companies now trading below $1. Many others already have been delisted this year as the market has tumbled. Technology companies have been hit particularly hard.

Experts said a move to loosen the rules could be one way for Nasdaq to stabilize its market. The changes, if they occur, could lead to Nasdaq retaining the 15% of its total listed firms that currently are flirting with the $1 barrier.

Nasdaq puts a company on notice if the firm’s stock trades for less than $1 a share for 30 consecutive days. If the stock fails to rise back above the $1 level for 10 consecutive trading days during the next 90 days, Nasdaq sends the company a delisting notice, which the firm can appeal.

Delisting from Nasdaq is a blow to a company’s prestige. Delisting pushes a stock into the over-the-counter market. Many brokers aren’t permitted to recommend OTC issues to clients.

An executive at a well-known technology company, who asked not to be identified, told Reuters that the company had been informed by Nasdaq it would not enforce the delisting rule, even though the firm’s shares had traded below $1 for nearly 30 days.

The executive said the company’s lawyers were told by Nasdaq it would waive its delisting regulations until at least the end of the year.

The chief executive of a leading trading firm who asked not to be identified told Reuters that he advised Nasdaq it needed to change its delisting rules. “The bottom line is that [the $1 minimum] test alone . . . is not adequate,” he said.

Nasdaq is “closely monitoring these issues,” spokesman Scott Peterson said. He declined further comment.

The New York Stock Exchange said it was not planning to relax its delisting rules.