Capital Markets

Etch-A-Sketch Maker to Voluntarily Delist

Company blames costliness of Sarbanes-Oxley Act compliance among other factors.
Stephen TaubFebruary 25, 2004

It will soon be very difficult to trace the fortunes of the maker of Etch-A-Sketch.

The Ohio Art Company, best known for the generations-old toy, is the latest small company to voluntarily delist its common stock. The 96 year-old company said it will file a Form 15 with the Securities and Exchange Commission to suspend registration of its common stock with the American Stock Exchange.

In making the announcement, company executives offered several reasons for the withdrawal, including the material costs of complying with the requirements of the Sarbanes-Oxley Act. Other reasons included a decline in the number of stockholders of record and the limited extent of trading in the stock.

Ohio Art’s stock on Monday closed down 20 percent after plunging more than 30 percent on the news earlier in the trading session, pushing down its market capitalization below $7 million. It’s not uncommon for the stock to trade fewer than 1,000 shares in a day — or none at all — although on Monday more than 49,000 shares traded hands.

“After careful consideration, the board of directors concluded that it was no longer in the best interests of the company to be subject to the SEC’s reporting requirements,” said William Killgallon, Ohio Art’s chairman and CEO.” Changing conditions for our business have created an environment where the advantages of being a public reporting company are outweighed by the significant accounting, legal and administrative costs that are associated with the SEC’s reporting requirements,” he added.

The CEO also pointed out that the rising costs were expected to increase as new legislation and SEC regulations went into affect. He commented that in addition to significant costs savings, the deregistration would provide an opportunity for management “to focus more completely on the company’s business operations.”

“We’re not trying to hide,” CFO Jerry Kneipp told the Associated Press. “We just want to save some money and time.”

Following deregistration and delisting from the American Stock Exchange, the stock will likely be quoted on the Pink Sheets, an electronic quotation service for over-the-counter securities.