Nasdaq Eases Stock Listing Standards
The Nasdaq Stock Market headed off the possible delisting of hundreds of stocks by suspending rules Thursday that require companies to maintain a share price of at least $1.
Nasdaq confirmed that it has placed a moratorium until January on two listing standards tied to share prices. Almost 700 of the 4,300 companies traded on Nasdaq, including online search service Ask Jeeves Inc. and wireless service provider OmniSky Corp., are at or below $1 a share.
The moratorium will provide breathing room for these companies, which otherwise could have had their shares dropped from Nasdaq, forcing them into the over-the-counter market. Once a company is delisted, analysts usually drop their coverage, brokers stop recommending the stock to clients, and investors can have trouble getting timely price quotes.
“The perception is, if you have a stock below $1, you’re not a very good company,” said Peter Jackson, chief executive of Intraware Inc., an Orinda, Calif., software distributor whose shares traded at 64 cents on Thursday. They have fallen from $8 a year ago with the general meltdown in technology stocks.
Nasdaq has sought for years to distance itself from stocks that trade below $1 and are often most vulnerable to manipulation. The market sets minimum listing standards designed to weed out companies that are no longer financially healthy.
However, legal experts said that after the recent market swoon, enforcing the $1 benchmark could lead to the delisting of companies that remain financially viable.
But allowing speculative companies to linger on Nasdaq could tarnish the market’s reputation, said Patrick Healy, president of the Issuer Network, a Chevy Chase, Md., firm that helps companies decide which market to list their stocks on.
“I understand why they’re doing what they’re doing, but it does raise a question from a qualitative perspective about whether this is really going to help [Nasdaq’s image] over the long run,” Healy said.
Besides the $1 share price threshold, the moratorium also affects requirements regarding the total market value of a company’s “public float”--the portion of its stock owned by the public.
Other U.S. markets, such as the New York Stock Exchange, haven’t said whether they also will relax listing standards.
Nasdaq said in a release that it suspended the standards in response to the market slide that followed the Sept. 11 terrorist attacks. The Nasdaq composite index fell 16% last week and is down 71% from its March 2000 peak.
In the last month, some 229 Nasdaq stocks have fallen below the $1 level, including companies such as Sunrise Technologies International Inc. and Barnesandnoble.com Inc. Delistings this year are running at about the pace of 1998. But the virtual disappearance of initial public offerings has robbed Nasdaq of replacement members, and overall listings are down almost 9% from last year.
Normally, Nasdaq companies whose minimum bid price remains below $1 a share for 30 consecutive trading days face delisting. Those that trade on the Nasdaq National Market, as opposed to its SmallCap market, can choose a different maintenance standard that requires a minimum bid price of $3 a share.
Once a company has fallen below the minimum bid price for 30 consecutive days, it has 90 calendar days to come back into compliance. Those that fail to do so and are delisted can appeal to Nasdaq, which is supposed to schedule a hearing within 45 days. After the hearing, Nasdaq issues a written decision on the appeal.
The moratorium also covers companies that are already under review for not meeting the minimum criteria, according to Nasdaq. Nasdaq won’t begin the delisting countdown for companies that fall below these levels during the rest of 2001.
Companies listed on the Nasdaq National Market pay annual fees that are based on total shares outstanding and range from $10,710 to $50,000 per company. Last year, Nasdaq’s revenue from all annual listing and other issuer services fees was $81.8 million, or about 9.8% of total revenue.
Thus, the moratorium on listing standards could help Nasdaq preserve revenue.
Material from staff writer Walter Hamilton and Bloomberg News was used in compiling this report.
