MARKET WATCH: What Does It Mean When Stocks Drop Below $1?
Jeff Harbaugh
- November 20 2008
- 1,485 views
- 15 comments
There has, I gather, been some discussions/speculation about the circumstances under which a publicly traded company can be delisted from a stock exchange. I don’t claim to be an expert in this. It’s different for each exchange and I guess not set in stone. But as there seems to be some interest, I thought I’d lay out what I found out about the process for the NASDAQ market.
Direct from the NASDAQ web site, here are the requirements to continue being listed.
1. For continued listing under Standard 2, a company must satisfy one of the following: the market value of listed securities requirement or the total assets and the total revenue requirement. Under Marketplace Rule 4200(a)(20), listed securities is defined as “securities listed on NASDAQ or another national securities exchange”.
2. Publicly held shares is defined as total shares outstanding, less any shares held by officers, directors or beneficial owners of 10% or more.
3. Total shareholders include both holders of beneficial interest and holders of record.
4. An electronic communications network (ECN) is not considered a market maker for the purpose of these rules.
5. Marketplace Rules 4350, 4351 and 4360
There, isn’t that simple? And I have no idea what Marketplace Rules 4350, 4351 and 4360 in footnote 5 are and am unlikely to go find out. Basically, like it says, a listed company has to meet all the criteria for one of the two standards shown. If you’re really curious you can go HERE and read about it to your heart’s content.
Most of the stuff on the list is pretty self explanatory and I imagine what everybody is focused on right now is the bid price of $1.00. What happens if that isn’t maintained?
If a company, for example, doesn’t meet the minimum bid price for 30 consecutive business days, NASDAQ sends it a deficiency notice stating that it has 90 calendar days to correct the deficiency. The deficiency is cured if the company meets the standard for ten consecutive business days during the 90 day period after they receive the deficiency notice. The exchange can and has shown occasional flexibility in applying these standards. But generally, they are pretty strict as the standards are not considered very rigorous.
But never mind all this. It doesn’t matter right now if you’re a NASDAQ listed company. Effective October 16, 2008, due to “current extraordinary market conditions, NASDAQ has determined to suspend the bid price and market value of publicly held shares requirements through Friday, January 16, 2009.” Here’s the link to the announcement: www.nasdaq.com/about/IA_2008-005.pdf.
So whatever might or might not happen in our little corner of the world, NASDAQ companies don’t have to worry about it until next year.
Jeff Harbaugh is a consultant for the action sports industry and works with companies to identify and focus on critical business issues and opportunities fundamental to the bottom line. For more information, visit www.jeffharbaugh.com.
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November 20th, 2008 at 9:58 am
Good info Jeff - thanks!
November 20th, 2008 at 11:23 am
Quik dipped below a $1 today.
WOW
November 20th, 2008 at 2:01 pm
Jeff,
What would happen to Quiksilver’s day-to-day operations if the company declares bankruptcy? It seems like the airlines are “going bankrupt” all the time, but they keep functioning.
November 20th, 2008 at 5:02 pm
I have no information that Quik plans or need to consider a bankruptcy filing, but if they did the answer as to what happens is, of course, it depends. Probably the filing would be a Chapter 11 under which they reorganize. Once you file, you can’t pay any unsecured creditors, so typically a company will pay its employees what they owe them before filing. Then, often it’s business as usual while the bankruptcy works its way through the courts. The employees still at the company would go about their jobs like they always had and they would get paid like they always had.
Typically, there would be a cash collateral hearing where the company would get the court’s permission to use the collateral of the secured creditors. Most times, this is granted and frequently the secured creditors even support it as long as they believe their collateral is being protected because they think the odds of them being paid in full is better if the company keeps operating.
In bankruptcy, the company cannot pay any old unsecured debt until a plan is in place. Essentially, the unsecured creditors have made an involuntary partial or complete, temporary or permanent, contribution to the company’s equity since they don’t get paid. When and how much they get paid depends on the the plan comes out of the process and the general prospects of the company.
Sometimes it’s easier for a company with problems to get financing once it’s in bankruptcy because your cash flow can improve dramatically once you don’t have to pay old, unsecured debt. Some lenders specialize in “debtor in possession” financing as it’s called.
Hope this is helpful.
J.
November 20th, 2008 at 5:45 pm
Jeff, you are a plethora of info. Very impressive, sir. A scholar and a gentleman. Thanks very much!
November 20th, 2008 at 6:51 pm
OUCH! Quiksilver closed at .88 cents a share today!
November 21st, 2008 at 11:46 am
I am considering selling my home and doing a hostile takeover on Quik… If I get a few “buddies” together I think we could buy the whole friggin’ company!!! They have sales of around 2.4 BILLION and the market cap is hovering around 100 million…
Ya, I’m buying it ALL… MUUAAHAHAHAHAHAAA!!!!!
November 21st, 2008 at 12:12 pm
Great JOB , I’ll join YA!!!!!!!!I”LL get you my pretty and your little dog too……….
November 21st, 2008 at 12:14 pm
Wow- you must have a hell of house if you can sell it for $100 million in this market. Can I visit sometime? Your analysis is accurate but after you buy all the stock, you’ll then be in exactly the same position they are in. You will have to raise some money for the company. Still, it is an interesting propositon isn’t it? I haven’t crunched the numbers, but if you bought the shares at the current price (you’d probably have to offer a premium in a tender offer) and found some financing to stabilize the company, how far would the stock have to go up before you’d have more than earned back your investment and could pay off the money you put in to stabilize things?
I think you can assume there are people out there doing those calculations right now.
Thanks for your comment.
November 21st, 2008 at 1:29 pm
Jeff, no offense, but I don’t think you know my “buddies”… thus 100 mil is not an issue…. I’m KIDDING.
Yes, the main point is that the company, in my humble, yet ridiculously experienced opinion (ha), IS IN JEOPARDY. Not so much from a brand perspective folks - From a “control” perspective. A public conglomorate, such as VF Corp could buy up ZQK right now without an issue and literally have their way with them.
The beauty and the horror of being publicly traded is your exposure… there’s big upside potential and big downside risk. And when your downside risk gets into the “red zone” and another more “healthy” company decides to buy you - you don’t necessarily have to even be for sale, meaning, you don’t have much of a choice - it’s up to the masses of shareholders at that point (and they generally are looking out for their “investment” not the “brands”) It’s Monopoly for grown ups!
And yes, you can betcher-ballz that there are folks out there taking a hard look at buying ZQK altogether… in one fell-SWOOP!
*** P.S. And Zumiez just came out and said that “Big Brands Are Hurting Our Sales!”… duh. The smaller, up n’ coming brands are selling faster and deeper right now. The tide is turning, time to wake up. These big brands are so massive and so overly distributed… did anyone get an email yesterday from Quik’s online direct site offering 40% off just for ordering from THEM direct?! Are you kidding me??? MASS MARKET + OVERSOLD + ONLINE DIRECT + BRAND STORES + PUBLICLY TRADED = “Surf Company”…? Haha
November 21st, 2008 at 4:43 pm
You ever hear of the term “crowd-funding”? A town in England together pooled their money and bought a professional soccer team for a couple of hundred million. We can’t let a company like VF buy quik. I call dibs on McKnight’s office since I came up with the idea!
November 21st, 2008 at 5:55 pm
Hey - maybe that kook from Adrenalina will send Quik a letter saying he intends to buy them?
Adrenalina doesn’t even need to re-type the letter, just scratch the “Pac-Sun” name off the top and put “To: Quiksilver”…
Or I could draft it for them now:
_________________________
To Quiksilver,
I have 110 million doallars. I now own you.
Thanks,
Kook
P.S. Please also consider this letter your termination notice. We are moving in and taking over the Quik headquarters on Jan 1st. Pack up and clean out your desk… Merry Christmas!
November 22nd, 2008 at 8:17 pm
P.P.S. And yes, we will be selling Crocs.
November 24th, 2008 at 9:29 am
I have Quik shares purchased through employee share purchase program around 3.5yrs ago at $16 a share…
Stoked on my loss…NOT.
There goes around $10k down the drain.
November 24th, 2008 at 9:51 am
If I could buy Quik myself, I would. I’d start by getting rid of the “Top Dogs” (you know who they are) and all of the non-essential dopers and drunks. Start anew with people who have at least 98% of their business savvy brain cells still functioning.
“Ring, ring, ring” oh crap, my alram clock went off….whew, what an AWFUL nightmare I just had!