85.7 F
San Fernando
Thursday, Nov 30, 2023

For Nasdaq Firms, Time Is Fleeting, Problems Aren’t

For Nasdaq Firms, Time Is Fleeting, Problems Aren’t By CARLOS MARTINEZ Staff Reporter A pending change in rules that would give Nasdaq-listed companies additional time to boost their stock price up to the $1 per share minimums required to remain on the exchange, may not be enough to save a number of these ailing firms. The troubles at many of these companies run deeper than the downturn in the stock market. And even with more time, analysts say many are unlikely to attract the new investment they need to see a significant boost in their stock prices. “It’s hard to say whether a company will be able to recover the value of its stock price and avoid delisting even if they get a year to comply,” said Craig Shere, an analyst for Standard & Poor’s. Nasdaq has required its listed companies to trade at a minimum of $1 per share in order to remain on the exchange. Those companies that fall below the minimum are given a 90-day grace period to boost their stock price. Although the exchange stopped enforcing its regulations in January, 2002, as the market for many Nasdaq-listed companies tanked, it has not moved to change its rules until now. Earlier this month, Nasdaq proposed to extend the grace period for enforcing the minimum stock price requirement to 180 days, a plan which is awaiting Securities and Exchange Commission approval. At the same time, the exchange will continue its policy of non-enforcement through Dec. 31, 2004. Some 500 Nasdaq companies are currently trading below the $1 per share minimum. In the San Fernando Valley, at least six companies are currently trading at under $1 and would face delisting without a change in the regulations. Among them are: Capstone Turbine Corp., Netsol Technologies Inc., Optical Communications Inc., Perfect Data Corp., SMTEK International Inc. and Youbet.com Inc. Another 10 Valley companies are now trading between $1 and $3.60. Nasdaq operates two listings, a National Market and Nasdaq SmallCap Market, which has lower minimums for such things as the number of publicly held shares and their market value. Some companies have already moved into the small cap fund after falling out of the Nasdaq National Market. Some company executives say the extension will give them the breathing room they need to boost their stock price. “Time will help everybody, not just companies in Nasdaq, but everyone who is working hard to move forward,” said Naeem Ghaury, CEO of Netsol, whose information technology company was trading around 20 cents a share last week. But others point out that, regardless of how much time these companies have, they are not likely to attract the kinds of institutional investors they need to permanently hike their stock prices. “The market is gone for a lot of these companies,” said Shere. Among the companies impacted by the proposal would be Chatsworth-based Optical Communication Products, a victim of the telecommunications meltdown. The company’s stock has been trading around $1 most of the past four months. At its highest in the past 52 weeks, the company’s shares traded at $3.28, but that was nearly a year ago. Although officials there would not comment, analysts like Michael Davis of Schaefer Investment Research said Optical Communication may need more time than the current proposal allows to keep its stock price above the $1 minimum. “They’ve been struggling for a long time, and the market just isn’t there for them, and there’s no sign it’s coming back anytime soon,” he said. Likewise, electric generator-maker Capstone Turbine in Chatsworth, has seen its stock price steadily drop from a high of $98 two years ago, to 79 cents early in February. Capstone officials would not comment. But Shere, who dropped coverage of Capstone last summer, said at the time that the company’s viability was called into question when its revenues failed to meet the company’s previously stated goals. “I’m sure that loosening up the requirements is going to help some companies, but it’s really going to prolong the inevitable in a lot of cases,” Shere said. Another company facing the same predicament is Chatsworth-based telecommunications equipment-maker MRV Communications Inc. MRV’s shares have been hovering around $1 since August. In the past 12 months, the company’s stock has traded as high as $3.83 and as low as 60 cents. But like others that supply the telecom market, its future is dependent on when and by how much, the telecommunications industry turns around. “The fact they’re still in business says a lot, but you have to be very optimistic to think that things can turn around in this environment for some of these companies,” said Milan Vuckovic, president of Alpha Banker investment firm. A number of Valley companies, including TDK Mediactive Inc., Film Roman Inc., Vertel Corp. and PASW Inc., which has since relocated to Northern California, have already been delisted. They have faced a number of problems, ranging from lack of analyst interest and exposure to difficulty raising capital as a result. Martin Paravato, chief financial officer for video game-maker TDK of Westlake Village, said companies face difficult hurdles after being delisted. “We were delisted and it’s tough. But the bottom line is that companies lose investors, and the stock price goes further down and you can’t get more investors,” he said. TDK’s stock price was around 57 cents a share last week, compared to a 52-week high of $2.92 and a 52-week low of 56 cents. TDK is now traded on Nasdaq’s over the counter bulletin board. Scott Peterson, a spokesman for Nasdaq, said the proposal currently undergoing SEC scrutiny was developed because there are more companies facing delisting now than ever before in the history of the exchange. According to Nasdaq, about 500 of the exchange’s 3,680 companies are trading below $1. “We want to help because it’s a tough blow for a company to get delisted from the national market,” he said. Once a company is delisted from one of the major exchanges, it typically moves to an over-the-counter exchange where it has difficulty attracting the attention of investors and analysts. “Once you’re out of the national market, it’s like you’re off the radar screen and nobody’s going to find you,” said Schaefer Investment’s Davis. “You find that you’ll have a hard time getting investors and even harder time getting financing.”

Featured Articles

Related Articles