Updated from Feb. 8 with eDiets.com delisting notice.
BOSTON (TheStreet) -- U.S. stocks started off the year with a winning January, as the S&P 500, Nasdaq and Dow Jones Industrial Average posted gains of as much as 2.7%, or more than 30% on an annualized basis, twice last year's increase.
Small-cap stocks fared even better, with the Russell 2000 Index rising more than 3%, as an acceleration in global economic growth attracted investors to companies that can produce outsized profits. Lost amid the euphoria is the fact that small companies pose risks rarely present at larger peers. In fact, 19 stocks trading on the technology-heavy Nasdaq this year have been alerted of deficiencies that could force a delisting.
Those deficiencies range from violations of the minimum bid-price rule, as share prices of some penny stocks have languished below $1, to violations of audit-committee requirements, market value, proxy solicitation or even public interest.Companies faced with a delisting typically see a detrimental effect on share prices. For instance, the New York Stock Exchange in January delisted the stock of Capitol Bancorp. The company's shares traded for $3 a year ago, but now can be bought for 25 cents on the Pink Sheets. Still, because companies on exchanges' watch lists record higher-than-average volatility, risk-friendly investors have the chance to make lots of money, either by shorting the stocks on expectations shares will fall, or going long on the hopes they will live to fight another day. Fifteen companies listed on the Nasdaq received delisting warnings in December, and those stocks fell by an average 10% over the past three months. Community Central Bank (CCBD) was the biggest loser, down 53%, while Star Buffet (STRZ) rallied more than 70% during the same period. Nevertheless, all 19 companies were notified in January that they're in violation of listing requirements and could be delisted from the Nasdaq. The following companies now have a limited window of time to regain compliance with the exchange's listing rules.
Educational Development (EDUC) Company Profile: Educational Development is a publisher of a line of children's books in the U.S. Current Share Price: $6.80 (Feb. 7) Listing Violation: Audit committee composition. The listing rule requires that a majority of the board of directors must be comprised of independent directors and that the company's audit committee have at least three members, all of whom must be independent. Received Nasdaq Notice: Jan. 3 Management's Expected Action: Educational Development has until its next annual meeting to regain compliance with the listing requirement. "The board is currently considering candidates and intends to appoint an independent director to fill the vacancy on the board and the audit committee as soon as possible," the company said in a regulatory filing. The company said it expects that to occur before the next annual meeting.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV