Nasdaq overlooks own rule to rescue bruised stocks
NEW YORK (Reuters) - The Nasdaq Stock Market's decision to suspend one of its own listing rules comes as an avalanche of shares tumble below the $1 threshold, and is intended to avoid the mass delistings that followed the burst of the dot-com bubble.
Last week, parent company Nasdaq OMX Group (NDAQ.O) filed a request with the U.S. Securities and Exchange Commission to temporarily suspend the minimum price requirement that protects listed companies from becoming penny stocks.
It said in the filing that "U.S. and world financial markets have faced almost unprecedented turmoil," which has undercut the share prices of companies that would otherwise remain suitable for continued listing.
The SEC endorsed the suspension, which went into effect on Friday and will end Friday January 16.
Magnus Bocker, Nasdaq's president, told Reuters the measure is "a very natural thing when the market is in disarray like it is right now."
"We saw the same things following September 11. There is so much uncertainty in the equity markets right now for so many companies, that focusing short-term on that rule is just the wrong focus," he said in an interview.
Nasdaq, traditionally home to technology stocks but now more diversified, said in the filing that the number of stocks falling below $1 has increased "dramatically" from last year, particularly this month.
At the end of September, 227 securities were penny stocks, up from 64 at the same time last year, the exchange said. By October 9, the number had jumped to 344.
Among the Nasdaq's new penny stocks, satellite radio company Sirius XM Radio Inc (SIRI.O) said it is considering a reverse stock split, which would double its share price while halving the number of shares.
On the rival New York Stock Exchange, drugstore chain Rite Aid Corp (RAD.N), retailer Circuit City Stores Inc CC.N, and Internet-based calling firm Vonage Holdings Corp (VG.N) all recently dipped below the $1 level. They now trade on NYSE's small-cap Arca platform.
Glenn Tyranski, senior vice president of financial compliance at NYSE Regulation, the arm's length regulatory arm at exchange parent NYSE Euronext (NYX.N), said about 20 listings are below the minimum price requirement.
But NYSE is not now considering suspending its price requirement, he told Reuters. "It's more than we've had previously, but we don't have that wave of people that are tripping the (requirement) yet."
ANOTHER CRISIS, ANOTHER SUSPENSION
While NYSE has never suspended its price requirements, Nasdaq did so shortly after the September 11, 2001 attacks on the United States, in an effort to keep plunging stocks on the public market.
That suspension also came amid the stock market downturn caused by tumbling tech stocks, or the bursting of the "dot-com bubble," which swelled to its maximum size in 2000. Scores of Internet companies were wiped out over the next two years, badly shaking the tech-heavy Nasdaq. Continued...
