NASDAQ—Delisting Waiver Is Gift From Nasdaq

A number of Valley companies whose stock is traded on Nasdaq are breathing easier since the tech-heavy exchange agreed Sept. 27 to suspend its minimum share price requirement for the next three months. Nasdaq said it’s waiving the rule requiring listed companies to maintain a closing price of least $1 a share after it became evident that some of the companies that make up its Nasdaq 100 index could face delisting. Among 101 Tech Corridor companies whose stock was trading below $1 last week were AML Communications Inc. and Accelerated Networks Inc. of Camarillo, Calabasas-based Right Start Inc., Franklin Telecommunications Inc. of Westlake Village, Vertel Corp. and Youbet.com Inc. of Woodland Hills and Iwerks Entertainment Inc. and Film Roman Inc., both based in Burbank. “It’s the right thing to do overall and, given the number of Nasdaq member firms that are in a similar position, it’s what they need to do,” said David Swoish, director of finance at AML Communications Inc. AML, which makes telecommunications amplifiers and components for wireless, defense-related microwave and fiber optic communications devices, was notified last week by Nasdaq that it met neither the minimum price requirement nor a requirement demanding that its net tangible assets be at least $2.5 million. The company, which would normally have 30 days to bring its stock price back to at least $1, will now have nearly three months to comply before the rule is invoked again on Jan. 2. AML’s stock closed Friday at 68 cents, with a 52-week high of $3.50 and 52-week low of 44 cents. David Weild, Nasdaq’s corporate client division director, said the exchange’s relaxing of regulations was motivated by both the recent economic slump and the Sept. 11 terrorist attacks. “We want to help companies get back to business and not have to worry about whether they’re meeting the requirement,” Weild said. PASW Inc. of Thousand Oaks ran into similar trouble a month too early. William E. Sliney, CEO of PASW Inc., which was delisted last week, said he wishes the rule change could have taken place much earlier. “We were in the process of delisting since August, so this rule change isn’t affecting us,” said Sliney, who is looking for a merger partner to recapitalize his company and eventually return to Nasdaq. “Everyone would prefer to stay in the national market, but these rules are very specific and unfortunately the rule change doesn’t do us any good,” he said. The company was cited by Nasdaq for failing to maintain a minimum $1 value on its stock for 30 consecutive trading days and for failing to have a minimum public float of $1 million over 30 consecutive trading days. The firm is now trading on the more obscure Nasdaq OTC Bulletin Board. PASW, formerly Pacific Softworks Inc., develops and licenses Web-based software and software development tools. Its stock closed Friday at 8 cents a share, with a 52-week high of $1.81 and a 52-week low of 4 cents. The news from Nasdaq was greeted with silence at online gaming company Youbet.com Inc., which was on the verge of being delisted from Nasdaq in July before rallying briefly. Its stock has again fallen below $1 in recent weeks. Officials there would not comment. Youbet closed Friday at 82 cents a share, with a 52-week high of $2 and a 52-week low of 30 cents. But Brent Zimmerman, vice president of investor relations for Westlake Village-based United Online Inc., formerly NetZero Inc., which also faced delisting for not meeting the requirement before the rule’s suspension, said Nasdaq’s action gives companies time to recover from a down economy. “It gives them a chance to start fresh,” he said. Netzero, which changed its name after its acquisition of Juno Online Services Inc. last month, was in the early stages of delisting when it took over Juno, a move that boosted its stock price from 90 cents a share to the current $3.03 a share. “The rule suspension doesn’t really impact us, but it means that our case is closed,” he said. Craig Shere, an equities analyst for Standard & Poor Inc., said the prospect of delisting strikes at the heart of a company’s future prospects and its finances. “Once you get delisted, the capital markets immediately dry up. There’s not going to be much financing that’s going to be available once you’re off the market,” Shere said. Besides the marquee value of being listed on the world’s second largest stock exchange, Shere said, in the past Nasdaq companies have basked in the reflected glory of some of its high fliers, such as Sun Microsystems Inc. and Microsoft Corp. A number of companies in the Nasdaq 100, including Metromedia Fiber Networks and At Home Corp., closed last week below the $1 minimum and were in danger of delisting. Mark Gunderson, a Nasdaq spokesman, said companies that are delisted then qualify for its Small Cap market or they may find themselves on the OTC Bulletin Board, which is generally not listed in most newspapers. Nasdaq is the only major stock market with a minimum stock price requirement. Tom Wyman, an analyst with J.P. Morgan Securities Inc., said delisted companies lose much of their credibility, status and even analyst coverage. Many large brokerage firms refuse to provide financing for delisted companies. But Wyman was unsure whether the rule suspension would merely prolong the inevitable or actually help companies bolster their stock value. Delisting is not immediate, but a rather long and protracted process that allows companies plenty of opportunity to avoid it, Gunderson said. Targeted companies are sent a so-called “deficiency notice,” sometimes giving them up to 90 days to comply with Nasdaq regulations. If a company still fails to meet minimum requirements, a hearing process could take as much as another 90 days, giving the company up to six months to boost its stock price above the $1 mark, Gunderson said. One tactic some have used to avoid delisting has been a reverse stock split, where the company asks shareholders to return their shares for fewer shares at a higher value, thus reducing the number of outstanding shares and boosting the stock price.