March Delisting Notices Ramp Higher

NEW YORK ( TheStreet) -- YRC Worldwide ( YRCW) and a handful of other stocks trading under $1 were slapped with a notice in March for failure to meet a bid price requirement laid out by the Nasdaq, although there is still time for these companies to regain compliance.

YRC Worldwide, like several other stocks, has less than six months to satisfy a Nasdaq listing rule that requires a stock to maintain a minimum bid price of $1. Investors in penny stocks like YRC Worldwide need to understand what options are available to the companies and what the future holds if the company they have invested in fails to regain the $1 price threshold.
YRC

If a stock closes below the $1 mark for 30 consecutive business days, it is granted a grace period of 180 calendar days to regain compliance with the Nasdaq's listing requirements. To regain compliance, a stock would have to close at or above $1 for a minimum of 10 consecutive trading sessions.

>>10 Companies That Received Delisting Notices in March

Zanett ( ZANE), for example, had been in danger of getting the boot from the Nasdaq. However, the company regained compliance with the bid price requirement after the stock closed above $1 for 10 consecutive business days.

The Nasdaq temporarily suspended the minimum bid listing requirement on Oct. 16, 2008, during the height of economic recession. The move allowed stocks trading under $1 to continue trading on the exchange. That temporary suspension was lifted on July 31, 2009, and the Nasdaq resumed sending out delisting warning letters to companies that were not in compliance.

March saw the largest number of notices for the minimum bid price requirement this year with a total of 16 companies on the Nasdaq's deficiency list as of April 6. That compares to only five companies that received notices in January and two in February. March ranks third after September 2009 and December 2009, with 29 and 23 companies, respectively, on the Nasdaq's deficiency list as of April 6.

For companies that received a notice in September, the 180-day grace period has already passed, putting those stocks at risk of immediate delisting. Companies that received a notice in March, on the other hand, still have months to remedy the price deficiency and continue listing on the exchange.

It's certainly in the best interest for a company to remain on the Nasdaq. Companies with shares that trade for pennies already have difficulty finding analyst coverage and institutional buyers. A delisting and a move to the OTC Bulletin Board could mean a further slide below the $1 mark for many companies.

Take Verso Technologies ( VRSOQ.PK), which had faced a March 15 delisting deadline before moving to the Pink Sheets. The stock now trades for a fraction of a penny. Similarly, Hythiam ( HYTH.OB) was up against the March 15 deadline before moving to the OTC Bulletin Board on Feb. 26. Shares traded as high as 64 cents in early January, but have since fallen to roughly 23 cents.

There are still ways for a stock to remain listed on the Nasdaq even if it does not meet the minimum bid price requirement. A company could institute a reverse stock split to artificially push a stock above $1. Alternatively, a company could apply for a transfer to the Nasdaq Capital Markets -- if it meets the other necessary requirements -- and request another 180-day grace period to address the minimum bid price mandate.

Companies could also appeal for a meeting with a Nasdaq Hearing Panel within seven days of receiving a delisting warning after the 180-day grace period. A company cannot be delisted until the Nasdaq's Hearing Panel has issued a written decision following a hearing.

For example, Sirius XM ( SIRI) had until March 15 to regain compliance with the minimum bid price requirement but failed to do so. However, the satellite radio company continues to list on the exchange as it has an April 29 hearing to request continued listing on the Nasdaq.

If all else fails, Sirius XM shareholders have approved a reverse stock split, which would reduce the number of shares outstanding and would boost the stock price above the $1 threshold. However, Sirius XM has said it intends to enact the reverse stock split only if it determines the action to be in the best interests of stockholders.

For a handful of penny stock companies, like YRC Worldwide, U.S. Concrete ( RMIX), OceanFreight ( OCNF) and Active Power ( ACPW), time is still on their side. But with a deadline only a few months away, investors still need to be aware of the danger of falling to the Pink Sheets.

-- Written by Robert Holmes in Boston.

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