Fannie Mae (FNMA)

[obiterdictum]

I have often wondered about something else: why were the commons not de-listed earlier? I see that, for 30 straight days starting December 1 2008, FNMA closed under $1. Shouldn't the NYSE have forcefully de-listed FNMA at that point?

No. The NYSE does not "forcefully delist" companies that are not in compliance with listing rules. There are delisting procedures found in NYSE Listed Company Manual, Section 8 Suspension and Delisting - mainly 802.02 and 802.03 and 804.00 the formal delisting procedures when a cure is not forthcoming. see: https://bit.ly/2Vvjdfz

Regarding the December 1, 2008 to 30 days later period see below.

Before delisting, the NYSE sends a notice listing non-compliance and waits for a company response indicating a plan to reach compliance or to voluntarily delist or become subject to negative delisting procedures. Companies are given a 6 month cure period.

In the case of FNMA, FNMA fell out of compliance under 802.01C - Price Criteria for Capital or Common Stock. See: https://bit.ly/33gFjVL

The item is reproduced below:

802.01C Price Criteria for Capital or Common Stock A company will be considered to be below compliance standards if the average closing price of a security as reported on the consolidated tape is less than $1.00 over a consecutive 30 trading-day period.

Once notified, the company must bring its share price and average share price back above $1.00 by six months following receipt of the notification. A company is not eligible to follow the procedures outlined in Paras. 802.02 and 802.03 with respect to this criteria. The company must, however, notify the Exchange, within 10 business days of receipt of the notification, of its intent to cure this deficiency or be subject to suspension and delisting procedures. In addition, a domestic company must disclose receipt of the notification by issuing a press release disclosing the fact that it has fallen below the continued listing standards of the Exchange within the time period allotted by SEC rules for the making of a filing with respect to Exchange notification of that event, but no longer than four business days after notification. A non-U.S. company must issue this press release within 30 days after notification. If the company fails to issue this press release during the allotted time period, the Exchange will issue the requisite press release. The company can regain compliance at any time during the six-month cure period if on the last trading day of any calendar month during the cure period the company has a closing share price of at least $1.00 and an average closing share price of at least $1.00 over the 30 trading-day period ending on the last trading day of that month. In the event that at the expiration of the six-month cure period, both a $1.00 closing share price on the last trading day of the cure period and a $1.00 average closing share price over the 30 trading-day period ending on the last trading day of the cure period are not attained, the Exchange will commence suspension and delisting procedures.

Notwithstanding the foregoing, if a company determines that, if necessary, it will cure the price condition by taking an action that will require approval of its shareholders, it must so inform the Exchange in the above referenced notification, must obtain the shareholder approval by no later than its next annual meeting, and must implement the action promptly thereafter. The price condition will be deemed cured if the price promptly exceeds $1.00 per share, and the price remains above the level for at least the following 30 trading days.

Notwithstanding the foregoing, if the subject security is not the primary trading common stock of the company (e.g., a tracking stock or a preferred class) or is a stock listed under the Affiliated Company standard where the parent remains in "control" as that term is used in that standard, the Exchange may determine whether to apply the Price Criteria to such security after evaluating the financial status of the company and/or the parent/affiliated company, as the case may be.
Amended: September 2, 2009 (NYSE-2009-88).

I don't recall seeing any press release or other communication by FHFA that indicated any attempt at a "cure" to bring the price back above $1.

Yes. There were no attempts made to cure. Alternatives were considered and deemed as inadequate and therefore not employed. FHFA declared that the alternatives to cure deficiencies did not assure compliance success.

Per NYSE rules, a company in that condition must either drop from the exchange or undertake a ‘cure’ to restore the stock price above the $1 mark if it does not meet the NYSE’s minimum price requirements. The alternatives for putting in place such a cure do not assure maintaining the minimum price level or avoiding loss of shareholder value. See: https://bit.ly/33a0xEv

It is odd that FHFA used the 30-day closing price argument in June of 2010, when it was first true 18 months prior.

It was not an argument and it is not odd. It was not an argument since the NYSE sent notice of price compliance failure to Fannie Mae. FHFA declined to become compliant and voluntarily delisted Fannie Mae common and preferred shares on the NYSE and Chicago Stock Exchange (and Freddie Mac).

On June 15, 2010, Fannie Mae (formally, the Federal National Mortgage Association) received a notice from the New York Stock Exchange (the "NYSE") that we had failed to satisfy one of the NYSE’s standards for continued listing of our common stock. Specifically, the NYSE advised us that we were "below criteria" for the Exchange’s price criteria for common stock because the average closing price of our common stock during a 30 consecutive trading day period was less than $1.00 per share. As a result, the NYSE informed us that we were not in compliance with the NYSE's continued listing criteria under Section 802.01C of the NYSE Listed Company Manual.

On June 16, 2010, we were directed by the Federal Housing Finance Agency ("FHFA"), our conservator, to delist our common and preferred stock from the NYSE and any other U.S. stock exchange where our common and preferred stock is listed. Upon its appointment as conservator, FHFA immediately succeeded to all rights, titles, powers and privileges of Fannie Mae, and of any shareholder, officer or director of the company with respect to the company and its assets. On June 16, 2010, we notified the NYSE and the Chicago Stock Exchange (the "CSE") that we intend to withdraw our common and preferred stock from listing.

On June 16, 2010, we issued a news release announcing our intent to delist our common and preferred stock. The news release, a copy of which is attached as Exhibit 99.1 to this report, is incorporated by reference into this report.

Pursuant to FHFA's direction and in accordance with Rule 12d2-2 under the Securities Exchange Act of 1934, we will file an application on Form 25 with the Securities and Exchange Commission to withdraw the listing of our common and preferred stock from the NYSE and CSE. We anticipate that the delisting of our common and preferred stock from the NYSE and CSE will be effective 10 days after we file the Form 25. https://www.sec.gov/Archives/edgar/data/310522/000129993310002367/htm_38021.htm

It is not odd since the NYSE sent a price non-compliance notice to Fannie Mae on November 12, 2008. The FHFA responded that it will try to reach compliance by May 11, 2009. See the November documents linked below. Here is an excerpt from the November 2008 8-K Item 3.01 submission:

On November 26, 2008, Fannie Mae advised the NYSE of its intent to cure this deficiency by May 11, 2009. Although Fannie Mae is currently working with its conservator, the Federal Housing Finance Agency ("FHFA"), to determine the specific action or actions that Fannie Mae will take to cure the deficiency, Fannie Mae has advised the NYSE, that, if necessary to bring its share price and its average share price for 30 consecutive trading days above $1.00, and subject to the approval of the U.S. Department of Treasury, Fannie Mae may undertake a reverse stock split in order to cure the deficiency prior to the May 11, 2009 date. Fannie Mae expects to determine the actual number of shares that will produce one share of common stock as a result of any reverse stock split based on both the market price of Fannie Mae’s common stock prior to announcement of the split and additional input from FHFA and Treasury.

Source:
Fannie Mae - Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing.
https://www.sec.gov/Archives/edgar/data/310522/000129993310002367/htm_38021.htm

Press Release (Exhibit 99.1) - Fannie Mae Notifies NYSE and Chicago Stock Exchange of Intention to Delist
https://www.sec.gov/Archives/edgar/data/310522/000129993310002367/exhibit1.htm

Form 25 - NOTIFICATION OF REMOVAL FROM LISTING AND/OR REGISTRATION UNDER SECTION 12(b) OF THE SECURITIES EXCHANGE ACT OF 1934
https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000310522&type=25&dateb=&owner=exclude&count=40

Fannie Mae - November 12, 2008 - Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing.
https://www.sec.gov/Archives/edgar/data/310522/000129993308005442/htm_30041.htm

November 18, 2008 - Fannie Mae Receives NYSE Notification on Continued Listing
https://www.sec.gov/Archives/edgar/data/310522/000129993308005442/exhibit1.htm

November 26, 2008 - Fannie Mae Advises NYSE of Intent to Meet Continued Listing Standard
https://www.sec.gov/Archives/edgar/data/310522/000129993308005560/exhibit1.htm

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Freddie Mac - Item 3.01. Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing.
https://www.sec.gov/Archives/edgar/data/1026214/000102621410000033/f71358e8vk.htm

Press Release - FREDDIE MAC NOTIFIES NYSE OF INTENTION TO DELIST
https://www.sec.gov/Archives/edgar/data/1026214/000102621410000033/f71358exv99w1.htm

Form 25 - NOTIFICATION OF REMOVAL FROM LISTING AND/OR REGISTRATION UNDER SECTION 12(b) OF THE SECURITIES EXCHANGE ACT OF 1934
https://www.sec.gov/Archives/edgar/data/1026214/000102621410000037/0001026214-10-000037-index.htm