Risk & Compliance

Delisting Dilemmas

More companies are being booted off the major exchanges since the dot-com bust eight years ago. This time, it's not just tech stocks.
Kate PlourdFebruary 1, 2009

From retailers and rent-a-car companies to banks and radio networks, the number of companies facing stock-exchange delisting is mounting by the day. Nasdaq booted a total of 85 companies for failing to meet listing requirements (or going bankrupt) in 2008, while the New York Stock Exchange (NYSE) dropped 54 for those reasons, levels not seen since the dot-com crash of 2001–2002. A number of other companies, such as Borders Group, Dollar Thrifty Automotive, and Pier 1 Imports, have announced they may meet the same fate in coming months absent drastic actions or a market turnaround.

In the wake of the dot-com bust, most of the delisting casualties were in the telecom, media, and technology sectors, but this time the phenomenon has spread far and wide. “All types of companies are delisting, and very well-known ones too,” says Glenn W. Tyranski, senior vice president of financial compliance for NYSE Regulation Inc. Some of the big names that have fallen off the board recently are directory publisher Idearc, radio network Westwood One, Novastar Financial, and Spectrum Brands.

The exchanges are making some accommodations for these trying times. In October, Nasdaq suspended certain listing requirements through January, such as the minimum $1 closing share price, and later extended that concession through April. While the NYSE has not yet waived standards, Tyranski says it’s now working much more closely with companies facing delisting and assisting those companies in creating an acceptable plan to achieve compliance, due to their growing number. “We take every meeting that they want to have so they can come in and talk to us,” he says. “It’s almost like being a therapist.”

Companies with stock prices dragging below the $1-per-share minimum may be able to stave off delisting through such tactics as stock buybacks or reverse stock splits, which reduce the number and increase the price of shares. Rite Aid, Sirius XM, Unisys, and BearingPoint are among the companies already implementing these strategies.

Once companies get the ax, though, current conditions suggest that they face a long haul from the Over-the-Counter Bulletin Board back to Nasdaq or the NYSE. Delisting is, in one sense, just a symptom of trouble, not a cause. But given investor skittishness, says Chris Kettmann, a senior vice president at FD Ashton Partners, it carries more symbolic weight than it once did and is a very real hurdle for companies to overcome.

Companies suspended from trading on the NYSE in 2008

  • R.H. Donnelley
  • Spectrum Brands
  • Tribune Co.
  • Pilgrim’s Pride
  • Downey Financial
  • Idearc
  • BearingPoint
  • ML Macadamia Orchards
  • VeraSun Energy
  • Gottschalks
  • GateHouse Media
  • WCI Communities
  • Feldman Mall Properties
  • SunTimes Media Group
  • Fremont General Corp.
  • Scottish Re Group

What happens when companies are delisted
Delistings soared during the dot-com crash, and are on the rise again