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Robert Trigaux

What's booming in recession? Stock delistings



Nasdaq Wake up and good morning. Welcome to another byproduct of falling shares of public companies: Stock delistings. This year, the New York Stock Exchange and Nasdaq Stock Market have delisted 129 companies for violating listing standards, the highest number since 226 in 2003, reports USA Today. That number is likely to swell when the Nasdaq reinstates its rule that companies maintain a stock price of at least $1 over 30 trading days. Nasdaq is expected to announce as soon as today that it is extending the suspension of its $1 rule three months to April 20, 2009. It was suspended this year as the market went into free fall.

The trend is ominous enough but bears watching in the Tampa Bay market of public companies as several companies are watching their shares spiral downwards into the low single digits. Clearwater's Aerosonic (ticker: AIM) and Largo's Geopharma (ticker: GORX) already trade under $1. Clearwater's Technology Research Corp. (ticker: TRCI) is at $1.65. And companies like MarineMax (ticker: HZO) and HSN (Home Shopping Network, ticker: HSNI) have both tumbled below $4.

Who's literally teetering on delisting? Pier 1 Imports is close, says Reuters. Even Nortel Networks is vulnerable. As the USA Today story reports, the threat of delisting could potentially put companies in an even tougher spot because it:

• Turns the falling stock into a real business peril. Companies with share prices below $1 aren't automatically delisted, but it starts the process. There are 548 companies on the Nasdaq and NYSE with stock prices less than $1, says Standard & Poor's Capital IQ. That's up from 69 in 2007 and the highest number on record since at least 1999.

• Adds another complication for individual companies that feel forced to take steps like reverse stock splits to shrink the number of shares outstanding in order to "raise" the individual price of their stock.That option won't work for a NYSE company, for example, whose market value had fallen below the minimum $25-million.

• Magnify credit market constriction. Companies with lower credit ratings are already facing record borrowing costs, with yields on junk bonds 20.72 percentage points higher than government debt with similar maturities, according to Merrill Lynch. That's more than twice the spread considered a sign of credit stress. "This is what happens in a bad economic time," says Doug Sandler of Riverfront Investment. "Companies living on the fringe aren't staying in the water."

--Robert Trigaux, Times Business Columnist

[Last modified: Tuesday, June 1, 2010 11:23am]


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