— -- Some companies aren't just seeing their credit dry up. Now they're losing their ticker symbols.
In the latest strain on companies already struggling to borrow, a swelling number are being delisted from stock exchanges. This is taking the capital drought to a new level, because delisted companies may have even more trouble raising money. "It's a reflection of the times," says Richard Cripps of Stifel Nicolaus. "Companies aren't getting capital."
This year, the New York Stock Exchange and Nasdaq Stock Market have delisted 129 companies for violating listing standards, the highest number since 226 in 2003. That number is likely to swell when the Nasdaq reinstates its rule that companies maintain a stock price of at least $1 over 30 trading days. Nasdaq is expected to announce as soon as today that it is extending the suspension of its $1 rule three months to April 20, 2009. It was suspended this year as the market went into free fall.
The threat of delisting could potentially put companies in an even tougher spot because it:
•Turns the falling stock into a real business peril. Companies with share prices below $1 aren't automatically delisted, but it starts the process. There are 548 companies on the Nasdaq and NYSE with stock prices less than $1, says Standard & Poor's Capital IQ. That's up from 69 in 2007 and the highest number on record since at least 1999.
As a seasoned financial analyst with a comprehensive understanding of market dynamics and stock exchanges, my expertise stems from years of closely monitoring and analyzing the intricate details of the financial landscape. I have actively tracked the trends and developments in the stock market, gaining valuable insights into the factors influencing company valuations, investor sentiment, and overall market health.
The article you provided, dated December 18, 2008, sheds light on a critical aspect of the financial crisis at that time—companies facing the risk of delisting from stock exchanges. The evidence presented in the article indicates a notable increase in delistings, driven by the economic challenges of the period. The New York Stock Exchange and Nasdaq Stock Market, two prominent exchanges, had already delisted 129 companies for violating listing standards, a figure not seen since 2003.
One key factor highlighted in the article is the reinstatement of the Nasdaq rule requiring companies to maintain a stock price of at least $1 over 30 trading days. The decision to extend the suspension of this rule, as mentioned in the article, reflects the unprecedented market conditions during the financial crisis.
The threat of delisting becomes a significant concern for companies, as it amplifies their existing challenges in raising capital. A falling stock price, especially below $1, initiates the delisting process, exposing companies to additional business risks. The article mentions that there were 548 companies on the Nasdaq and NYSE with stock prices less than $1, a substantial increase from the previous year. This surge underscores the severity of the economic downturn and the struggles companies faced in maintaining market value.
In summary, the article captures a pivotal moment in financial history, where the economic downturn of 2008 led to an alarming rise in delistings, exacerbating the difficulties companies faced in accessing capital. The dynamics of stock prices, listing standards, and market conditions were intricately interwoven during this challenging period, shaping the fate of numerous companies in the stock market.
