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BOSTON ( TheStreet) -- Small-cap stocks, measured by the Russell 2000 Index, were little changed in March, beating the broader market during a time of crisis in Japan and the Middle East.
Still, many carry risks rarely present at larger peers, including the inability to remain compliant with listing standards of the
Nasdaq, spurring delisting warnings from the exchange.
Overall, March was a losing month for most equities, with the
S&P 500 and Nasdaq Composite each down more than 1%.
Cisco Systems(CSCO), a constituent of the S&P 500, dropped 7% this month alone. Investors, though, bid up small-cap stocks, which is odd considering this class of stocks usually gets punished when the market is weak.
But some smaller companies, which typically expose investors to greater volatility, suffer from deficiencies ranging from violations of the minimum bid-price rule, as share prices of some penny stocks have languished below $1, to violations of board independence, delinquency and market value.
Companies faced with a delisting often meet their fate with large losses.
Fuqi International(FUQI.PK), a Chinese jewelry company, landed on the Nasdaq's list of non-compliant companies back in April 2010 due to delinquency in filing its annual report. Fuqi, which has faced accounting errors like other Chinese companies, was delinquent in filing other quarterly reports and also failed to hold its annual shareholder meeting. The stock is down more than 50% this year and traded on the Pink Sheets as of Tuesday.
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. Companies like
Star Buffet(STRZ), both slapped with delisting warnings, are up 73% and down 21%, respectively, over the past two months.
Nevertheless, the following
16 companies were notified in March that they're in violation of listing requirements and could be kicked off the Nasdaq. The companies now have a limited window of time to regain compliance with the exchange's listing rules.
StemCells(STEM)Company Profile: StemCells researches, develops and commercializes stem cell therapeutics. Its research and development programs are focused on its cellular medicine programs, where it identifies and develops cell-based therapeutics.
Current Share Price: 86 cents (March 29)
Listing Violation: Bid price. The listing rule requires that a company maintains a minimum closing bid price of $1 per share for its common stock. StemCells shares last closed above $1 on Jan. 18.
Received Nasdaq Notice: March 3
Management's Expected Action: StemCells said in a regulatory filing that the company will continue to monitor the closing bid price for its common stock and consider its available options to regain compliance with the Nasdaq minimum bid price requirement, which may include applying for an extension of the compliance period or an appeal to a Nasdaq Listing Qualifications Panel. The company has until Aug. 30 to regain compliance with the rule.