NYSE Euronext's (NYX) New York Stock Exchange said Friday it
temporarily will lower the minimum market-capitalization
requirement for listed companies, a move that stands to benefit
several companies potentially in danger of being delisted.
In the midst of global economic turmoil and a collapsing stock
market, companies on both NYSE Euronext and rival Nasdaq OMX Group
Inc. (NDAQ) have seen their stock prices dwindle. Already Nasdaq
has temporarily suspended its minimum bid price requirement for
listed companies and then recently extended the deadline on the
suspension, something NYSE has chosen not to do.
The moves come at a time when delistings are surging, with the
NYSE having the largest number of "for cause" delistings in five
years in 2008, and Nasdaq's delisting pace nearly doubling that of
2007 last year.
While neither the Nasdaq nor the NYSE derive a significant
amount of money from listing fees - they account for less than 10%
of each exchange's revenue - there remains a tug of war between the
two firms as each tries to balance the push by companies to remain
listed with the demands from investors and regulators for exchanges
to exercise proper oversight and implementation of rules.
The NYSE has decided to lower its minimum required market-cap -
or the value of all of a company's outstanding shares - to $15
million through April 22. The existing regulation required the
delisting of companies with a market cap of less than $25 million
over 30 consecutive trading days.
The temporary cut "will enable companies of suitable size and
quality to remain listed during current difficult market
conditions," NYSE Regulation Chief Executive Richard Ketchum said
in a press release.
The company said it chose to lower the standard rather than stop
applying it altogether because it believes companies whose market
caps fall below $15 million aren't suitable for continued
listing.
No Appeals On Mkt Cap Rule
Among the NYSE-listed companies that currently have market caps
of between $15 million and $25 million are ethanol producer
Aventine Renewable Energy Holdings Inc. (AVR) and bus manufacturer
Monaco Coach Corp. (MNC) (See full list below).
By comparison, stock market bellwethers Johnson & Johnson
(JNJ) and AT&T Corp. (T) have market caps around $150 billion,
while ExxonMobil Corp.'s (XON) market value is nearly $400
billion.
The market cap requirements, unlike the NYSE's minimum bid price
rules, aren't automatically subject to an appeals process. Under
NYSE rules, a company can be delisted if its stock prices remains
below $1 for 30 consecutive trading days.
"With the dollar minimum share price rule, you have at least six
months to work it out, but with the market-cap level, as soon as
you go below you're out," said Scott Peterson, a spokesman for the
NYSE.
More than half of the companies - including Coach - that have
fallen below the $25 million market cap level are currently
appealing a delisting based on the $1 share price rule.
Data from MKM Partners showed fewer than 3% of the stocks on the
NYSE Composite Index are trading at or below $1, though well-known
names such as Freddie Mac (FRE), Fannie Mae (FNM) and Rite Aid
Corp. (RAD) are included among the names below $1.
All told, roughly 54 companies were delisted from the NYSE in
2008, with more than half occurring in the last three months of the
year. In addition, the move below $25 million in market cap pushed
29 firms off the exchange.
Rules Differ At Nasdaq
By comparison, 85 companies were delisted for regulatory reasons
at the Nasdaq in 2008, with the majority at fault for not meeting
the $1 minimum bid requirement. Like the NYSE, Nasdaq gives
companies an additional period of several months to try to get back
in compliance.
The exchange filed with the Securities and Exchange Commission
in late October to suspended its minimum bid price and market-value
requirement for publicly held shares until Jan. 16. The SEC
informed Nasdaq on Dec. 20 it could extend that deadline to April
20.
The total market capitalization requirements for Nasdaq continue
to range between $35 million and $50 million depending on which of
the three Nasdaq marketplaces the stocks are listed.Unlike the
NYSE, however, firms aren't immediately delisted from the exchange
upon breaching those levels over a period of 10 days and instead go
through an appeals hearing process.
Among other exchanges, Deutsche Boerse AG (DB1.XE) doesn't have
a minimum market cap requirement, with a representative for the
exchange noting that when filing for an initial public offering,
the exchange has a minimum capital raised requirement of EUR1.25
million, though if the listed security drops below that level, the
company is not immediately delisted.
A representative for the Financial Services Authority, the
market regulator in the U.K., said there are no rules governing
minimum market cap or bid price requirements on the London Stock
Exchange. The spokeswoman did say that trading in specific stocks
could be suspended, permanently in cases such as excessive
volatility, or bankruptcy, much like both U.S. major exchanges.
NYSE-LISTED COMPANIES WITH MARKET CAPS OF $15M-$25M
(As of 1 p.m. ET Friday)
IDT Corp. (IDT)
Gray Television Inc. (GTN)
Torch Energy Royalty Trust (TRU)
Interstate Hotels & Resorts Inc. (IHR)
Saga Communications Inc. (SGA)
Sparton Corp. (SPA)
Monaco Coach Corp. (MNC)
Libbey Inc. (LBY)
Aventine Renewable Energy Holdings Inc. (AVR)
Pzena Investment Management Inc. (PZN)
Midway Games Inc. (MWY)
Material Sciences Corp. (MSC)
Dover Motorsports Inc. (DVD)
FirstFed Financial Corp. (FED)
GSC Investment Corp. (GNV)
Friedman Billings Ramsey Group Inc. (FBR)
Reddy Ice Holdings Inc. (FRZ)
-By Geoffrey Rogow, Dow Jones Newswires; 201-938-5360;
geoffrey.rogow@dowjones.com
(Jacob Bunge and Kerry Grace contributed to this report.)
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