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TheStreet Open House

26 Small-Cap Stocks in Danger of Delisting

BOSTON ( TheStreet) -- Small-cap stocks, measured by the Russell 2000 Index, were hit hard in May and trailed the broader market as investors sought the safety of large-cap shares such as Procter & Gamble (PG) and Colgate-Palmolive (CL).

The underperformance of small-cap stocks is worrisome, given they inherently carry higher risks than their larger peers do. One of those is the inability to remain compliant with listing standards of the Nasdaq, spurring delisting warnings from the exchange.

Overall, May was a money-losing month for equity investors, with the S&P 500 and Dow Jones Industrial Average down roughly 3% each. Farming and machinery stocks that have done well for investors, like Deere (DE) and Archer-Daniels Midland (ADM), were down more than 10%. Retailers like Big Lots (BIG), Staples (SPLS), Sears Holdings (SHLD) and Gap (GPS) were among the worst decliners on the S&P 500 in May.

Meanwhile, many small-cap stocks, such as YRC Worldwide (YRCW), have seen even sharper declines. 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.

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 break through with surging revenue or profit growth.

The following 26 companies were notified in May 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.






First Federal Bancshares of Arkansas (FFBHD)

Company Profile: First Federal Bancshares of Arkansas is a savings and loan holding company, which through its subsidiary, First Federal Bank, provides a line of financial products to individuals and small- to medium-sized businesses.

Current Share Price: $9.65 (as of last Friday, May 27)

Listing Violation: Public float. The listing rule requires that a company have at least 750,000 publicly held shares for continued listing. Currently, First Federal Bancshares of Arkansas has a public float of about 376,000 shares.

Received Nasdaq Notice: May 4

Management's Expected Action: The company said it expected to get a warning letter from the Nasdaq after it completed a reverse stock split, which reduced the number of shares outstanding. First Federal Bancshares of Arkansas has until June 20, to submit a plan to regain compliance. If the plan is accepted, the company would have until Oct. 31 to regain compliance with the rule. The company said that it already plans to issue up to 2.9 million shares of its common stock through a rights offering before June 20.

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