NYSE and Nasdaq gave companies a break during the market collapse but are now restoring listing standards.
Last fall and earlier this year, share prices were tanking, bad news appeared around every corner and hundreds of companies were trading under $1 per share and faced the prospect of being delisted from the Nasdaq and the New York Stock Exchange (NYSE) for failing to meet listing standards, including maintaining a minimum share price.
Both exchanges temporarily suspended some listing standards and lowered others. The idea was to give markets time to recover and companies time to fix their businesses.
The recovery took longer than expected and both organizations extended the suspension of standards earlier this year. But now, with the markets at year-to-date highs, it appears the bar is being raised again. Both exchanges were to end their suspensions Friday and revert to previous standards on Monday.
Glenn Tyranski, head of financial compliance at NYSE Euronext, said the program ''did what it needed to do." That is, it allowed companies to focus on business and not to worry about listing status. From its March low, the NYSE composite index has recovered almost 50 percent. At the market's lowest levels this year, more than 100 companies were below the $1 per share listing standard, and on the Nasdaq side were hundreds more.
Tyranski expects about two dozen companies will face the $1 listing standards on the NYSE this week, and it's likely none of them will be below the market capitalization standard of $15 million.
In February, NYSE Euronext temporarily suspended its $1 minimum stock price until June 30 and then extended it until July 31. At the same time, the NYSE temporarily lowered the $25 million market cap threshold to $15 million and in June moved to make that move permanent. From time to time, the NYSE has modified its listing standards, and the $15 million market cap standard is a number it used before. The NYSE still maintains the highest listing standards in the world.
Even though the exchange suspended some standards and lowered others, the NYSE still delisted 24 companies this year. Eight were delisted because of bankruptcy and eight were delisted because they failed to meet the lower $15 million market capitalization standard.
As the extended deadline approached Friday, there were still almost two dozen companies not meeting the $1 listing standards on the NYSE. Companies whose share price dipped below $1 during the time the suspension was in place will have six months to get their share price above $1. Companies that entered the suspension period below $1 will have less time to revive their prices.
On Oct. 6, 2008, NASDAQ implemented a temporary suspension on the enforcement of the minimum $1 bid price and the minimum market value of publicly held companies.
As many as 20 Minnesota-based companies were trading below $1 sometime since last September. Most of those were on the Nasdaq, and the suspension of the $1 listing standard certainly allowed many companies to regain compliance.
Gander Mountain, Plato Learning, Enteromedics and Entegris all were trading below $1 at some point but are now above $3.50 per share. Nine other Minnesota companies were under $1 and are now above that threshold.
Several other stocks trading on Nasdaq below $1 per share could face actions. For some of these companies, including FSI International, Analysts International, Granite City Food & Brewery and Nature Vision, a delisting would certainly hamper their ability to resuscitate their businesses.
A listing on a major exchange typically gives companies better access to credit and makes their stock more liquid. Listed companies also are eligible for inclusion in various stock indexes like the Russell 3000, which gives them a higher profile with investors. Many index-based mutual funds won't invest in companies that are not included in certain indexes. For their part, the exchanges earn annual and initial listing fees so it's in their interest to keep companies listed and to attract new listings.
The retirement of a Nature Vision board member in June put the Brainerd-based outdoor products maker in violation of listing standards based on outside board membership. With the stock trading at 24 cents per share, it will be below the Nasdaq minimum bid requirement. Casual-restaurant chain Granite City Food & Brewery is currently trading around 34 cents per share, but in June announced that it is continuing its efforts to restructure its debt and long-term obligations. FSI International, which makes equipment for the semiconductor industry, moved aggressively this spring to cut expenses and staff but the stock is trading at 85 cents per share.
Patrick Kennedy • 612-673-7926