Sam

Nasdaq reserves the right to delist a stock, if it does not meet its listing standards.

THE $1 PER SHARE REQUIREMENT

Most companies listed on Nasdaq must maintain a minimum bid price of $1 per share. Certain National Market companies are required to maintain a $3 bid price.

If a company trades for 30 consecutive business days below the minimum bid price, then Nasdaq's Listing Qualifications Department sends a "deficiency notice" to the company stating that it has 90 calendar days to meet the requirement.

THE TIMELY FINANCIAL REPORTS REQUIREMENT

In addition to trading for at least $1, companies must also file, on time, various reports with the SEC, including Forms 10-K and 10-Q. If a company fails to file or files late, it may be delisted.

A TEMPORARY CHANGE

Last month, Nasdaq temporarily shelved its $1 price benchmark for delisting. The halt, in effect until January 2, 2002, is aimed at protecting stocks hit hard by investor reaction to the events of September 11.

Among the stocks that were saved by the change: LivePerson, an online customer support group, and Autobytel, the popular online car buying service.

THE DELISTING NOTICE

Once a company gets a delisting notice, it has 7 calendar days in which to request a hearing. Otherwise the stock will automatically be delisted.

The company is also required to issue a press release announcing that it has received a delisting notice. If the company fails to issue the press release within 7 days, Nasdaq has the right to halt trading.

THE APPEALS HEARING

A company can elect either an oral hearing ($4,000 fee) or a written submission ($5,000 fee). The Hearing Panel consists of people from the business community -- lawyers, accountants, investment bankers, corporate officers, etc. Employees of NASD cannot be on the panel.

If the plan the company presents to the Panel appears viable and convinces members that management can bring the company back into compliance, the Panel may grant a conditional listing, officially known as an "exception." Exceptions run for a short period of time.

If the Panel does not grant an exception, the stock is either delisted immediately or its securities are transferred within a matter of days to the less prominent, less prestigious Nasdaq SmallCap Market. Being moved over to the SmallCap Market is like being demoted and is not nearly as disastrous as being delisted. However, it's not a total panacea as SmallCap Market stocks can also be delisted.

LIFE AFTER OFFICIAL DELISTING

Most companies that are delisted -- that is, they did not qualify to move to the SmallCap Market -- are eligible to be quoted on the OVER THE COUNTER BULLETIN BOARD, provided they are current in filing their SEC reports. Otherwise, they go to the lowest arena for trading, the PINK SHEETS.

The Over the Counter Bulletin Board is an electronic quotation service operated by the National Association of Securities Dealers. Details: http://www.otcbb.com/

The Pink Sheets is a quotation service that got its name from the pink colored paper on which company stock prices once were printed and distributed to professional traders. In 1999, the Pink Sheets moved into the digital world and now is an Internet-based electronic quotation service. However, digital or not, the service is basically unregulated. It does not require companies be registered with the SEC. It does not require that companies remain current in their financial filings. Translation: very risky. Details: http://www.pinksheets.com/

FINDING DELISTED STOCKS

If you are concerned that one of your stocks may be a candidate for delisting, log on to: http://www.nasdaqnews.com/ and click on "Trading Halts." You'll see that a number of stocks listed here have had their trading halted and then resumed within a short period of time. Do not confuse these with the officially delisted stocks which are designated by an H.4 or H.9 code. (It's all quite clearly spelled out on the site.)

GETTING RELISTED

A company can file a new listing application any time after it is delisted. There is no penalty period.

STRATEGIES TO KEEP AFLOAT

Companies obviously don't want to be booted from the Nasdaq exchange. Being booted means they face difficulty in getting attention from securities analysts, investment bankers and investors. Being delisted also fosters the impression that the firm may go out of business -- and many do.

So, companies with the threat of delisting hanging over their heads often try to boost their share price to $1 by buying back their own shares and thus reducing the number of publicly traded shares outstanding.

Or, management may declare a reverse stock split. This procedure also reduces the number of shares outstanding while at the same time increasing the price. For example, shareholders might trade in 10 shares that were selling at 50 cents/share for one share worth $5. Click HERE for my column on the pros and cons of reverse stock splits.

BUYandHOLD does not recommend any securities. The securities mentioned above are being used for illustrative purposes only and should not be regarded as an offer to sell or as a solicitation of an offer to buy.