The NASPP Blog

Rules were meant to be broken, right? Thankfully the U.S. Securities and Exchange Commission (SEC) and the NASDAQ stock exchange (NASDAQ) think so.  If not, I can bet there would be a number of publicly traded companies struggling today to maintain compliance with their stock exchange listing standards.  The SEC recently agreed to temporarily allow the NASDAQ to “bend the rules” a bit related to its listing standard criteria in response to the current economic environment.  Additional information about this topic is below.

Background

To be able to trade securities (i.e. shares of common stock issued by a public company) on a stock exchange, such as the New York Stock Exchange or the NASDAQ, a company has to be listed on that exchange and continue to follow certain listing standards thereafter to keep trading on that exchange.  For purposes of this blog, we will discuss the NASDAQ stock market’s listing standards only.

Failure to meet the listing standards imposed by a stock exchange will result in the possible delisting of the company.  One of the more common events prompting a delisting is the company’s failure to uphold the minimum required stock price rule, or market capitalization.  This requirement stipulates that a listed company have a closing stock price of more than $1 at least once during a 30 consecutive business day period.

The Good News

Don’t panic if you are employed by a NASDAQ listed company that might normally be at risk of not meeting the minimum share price rules mentioned above or other rules requiring a minimum value of publicly held shares.  The NASDAQ requested on two different occasions (an initial request and a second request extending the original grace period) that its regulators, the SEC, allow it to suspend these rules for NASDAQ listed companies who have recently been impacted by the steep decline in the stock market and might be at risk of non-compliance with its listing standards.  The SEC agreed to this suspension.  See Issuer Alert #2008-005A. As a result, the NASDAQ exchange won’t enforce its minimum bid price rule or other rules requiring a minimum value of publicly held shares until April 19, 2009.  No companies will be delisted during this period so you can breathe easy for now.  The old rules will resume effective April 20^th unless the NASDAQ requests another extension of this temporary suspension period and the request is accepted by the SEC.

Warnings and Second Chances to Comply

If the minimum bid price requirement does go back into effect as scheduled on April 20, all is not yet lost for those companies that don’t meet it. Here is a summary of the delisting process; you can see that there are numerous opportunities for companies to come back into compliance and to appeal NASDAQ’s decision:

• NASDAQ will send deficiency notices to affected company’s, advising that they have been afforded a “compliance period” of 180 calendar days to regain compliance with the applicable requirements.

• If the company does not demonstrate compliance within the compliance period, it will be issued a delisting letter, which it may appeal at that time.
• If the company is unable to maintain the continued listing criteria, it will be notified, in writing, of the nature of the deficiency and the action necessary to regain compliance. If the company receives a delisting letter, it will have the opportunity to appeal NASDAQ’s determination to the Hearings Panel.

Each trading day, NASDAQ publishes a list of companies that aren’t compliant with its listing standards. A company can regain compliance with the minimum bid price requirement when it has a closing bid price of $1.00 or more for 10 consecutive business days. NASDAQ views reverse stock splits as an acceptable method to regain compliance.

For more information regarding this topic, check out the NASDAQ’s general listing standards.

NASPP Quick Survey on Section 16

The NASPP has posted a new quick survey on Section 16 reporting and compliance procedures; please take a moment to complete it today.  The survey is only seven questions; you can probably complete it in less than 10 minutes.

Exequity Quick Take Survey: 2009 LTI Grant Practices 

Exequity is conducting a short survey on 2009 LTI grant practices to assess changes as a result of the recent economic turmoil.  The survey asks 11 questions, which a person knowledgeable about a company’s recent and current LTI grant practices can answer in five minutes or less.  Participants will receive a summary of the survey results.

-Robyn