Not everyone gets sent home when the party's over.

Some 279 companies were booted off the Nasdaq stock market by regulators through July this year for failing to meet listing standards, compared with 240 in 2000. Delisting is a bitter pill for shareholders, who often see their holdings drained of liquidity on the over-the-counter bulletin board. But while the end comes at a price, it has not always come quickly.

"When a stock gets below one dollar, it's pretty clear that the company's in trouble," says Michail Shadkin, lead trader at TraderPulse.com. "If Nasdaq pulled the trigger much sooner and investors were aware of that, it would force long-term investors to take their losses a little earlier and at least sell something out of a company that's eventually going to go to zero."

Fallen Angels

Nasdaq, which publishes its delisting guidelines on its Web site, sends out a deficiency notice when a stock trades at less than $1 for 30 consecutive days. It's up to the company whether to publicize the notice. "I'm sure people who follow

those companies want to know as much as possible, but the company is the best source for them," a spokesman for Nasdaq said. Following notice, the company has 90 days to regain compliance or appeal the ruling, which can extend the delisting procedure another seven months.

Stocks currently costing less than $1 include

Jupiter Media Metrix

(JMXI)

, an Internet data harvester, which toppled on Aug. 6 and trades for about 48 cents;

Telescan

(TSCN)

, which trades for 30 cents and recently said it was appealing its case before Nasdaq's panel; and

iXL Enterprises

(IIXL)

, which fell below a buck on July 31 and now trades for 26 cents. iXL and

Scient

(SCNT)

-- another penny stock since June 28 -- announced a merger in late July.

A low share price doesn't mean automatic delisting. Nasdaq has an elaborate set of requirements a company must satisfy to stay either on the National Market System or the SmallCap Market. Whatever the fine print says, there's a growing belief that Nasdaq is getting more compassionate toward its companies.

"It used to be that Nasdaq was really going after individual companies of questionable character," says Robert Matlin, a New York-based lawyer who has been a general counsel for many tech firms. But now that "every company other than

IBM

has crashed and burned," the appeal process "is more open" and Nasdaq "has been more willing to look at companies and hear their stories."

Nasdaq's leniency protects shareholders, as it's better than having shares "fall lower to the bulletin board," says Matlin. Companies can also do things like a reverse stock split to stay above the $1 bid, but that doesn't usually hold up over time, and "all you've done is wipe out a lot of shareholder value," he adds.

Salon Media Group

(SALN)

is a case in point. The company, which runs the Web magazine Salon.com, failed to meet the National Market's requirements after its stock dropped below $1. But it escaped the bulletin board with a temporary listing on Nasdaq's SmallCap market, which also has a $1 bid minimum.

"This is what we argued for in our appeal a few weeks ago. The requirements for the Nasdaq National Market listing were kind of out of reach," chief executive Michael O'Donnell told the

San Francisco Chronicle

. Shares closed down 3 cents, or 8%, at 35 cents Friday.

Shadkin pointed out that many companies with penny stocks sometimes "put up large bids that no one can really hit" in order to drive their stocks above a dollar. This adds 30 days grace time. "That kind of behavior Nasdaq needs to stop, and it's just not fair as it's total manipulation of the stock," Shadkin says. "

But it's hard to prove and for that reason Nasdaq doesn't really deal with that kind of scenario." The Nasdaq spokesman declined to comment.

Going Public

Nasdaq gets its revenue from three main sources: transaction fees from traders and investors; market information services, such as access to stock quotes and other data; and issuer services, which includes the annual and initial listing fees.

In its first quarterly statement, which comes ahead of its planned IPO expected next year, Nasdaq posted a 57% decline in net income for the second quarter, compared with a year ago. With the IPO market having dried up, listing activity has been down in 2001, although Nasdaq recently adopted an accounting standard under which it defers such revenues over several years. Still, some see the development as inauspicious.

It may not be "a real good time

for Nasdaq to go public," says Jay Ritter, professor of finance at University of Florida at Gainesville, but Nasdaq is "fundamentally healthy," and has "a demonstrated ability to withstand hard times," he says. "The securities business has been cyclical and will always be cyclical."

Nasdaq, like most IPO candidates, is trying to make money while putting its best foot forward. "Nasdaq should definitely do something about that to try to make delisting requirements much stricter. But chances are they're not going to do that because it's not in their favor," says Shadkin, pointing out that more delistings could mean a sharp cost to revenue.

But lawyer Metlin doesn't think Nasdaq's business decisions impinge on what they do "internally" for their listed companies. "At the end of the day, they have to protect their reputation and integrity."