OT ~~ Nasdaq drops rule delisting shares under $1
By Matt Krantz, USA TODAY
Nasdaq's growing pile of penny stocks just got a second chance.
Thursday, the Nasdaq Stock Market said the destruction of tech stocks has forced it to temporarily suspend its 4-year-old rule requiring stocks to remain above $1 to be part of the exchange.
It's the most startling and symbolic sign yet of how badly beaten the Nasdaq, which just 2 years ago appeared to be overtaking the New York Stock Exchange for investor attention, has become.
The highflying tech stocks that led the Nasdaq in 1999 and the beginning of 2000 now "are barely alive," says Tony Cecin, head of stock trading at U.S. Bancorp Piper Jaffray.
Nasdaq market officials said the exchange is halting the rule until Jan. 2, 2002, to protect stocks irrationally punished after the Sept. 11 attacks. But the decision has Cecin and others wondering if the Nasdaq is taking a step back to its old reputation of being a haven of low-quality names. Nasdaq declined to say how many stocks are trading under $1. But analysts estimate that number to be around 13% of Nasdaq's stocks.
Nasdaq has many troubled stocks at a time when investors are seeking quality, a trend that was clear again Thursday. The Dow Jones industrials gained 114 points to 8681, while the Nasdaq composite lost 3 points to 1461 and nearly hit a bear market low. And while the Dow includes two Nasdaq stocks — Microsoft and Intel — it is down only 20% this year, while the Nasdaq is down 41%.
It's not just the Nasdaq upstarts that are in trouble. Six of the banner Nasdaq 100 index stocks are below $1.
Firms escaping delistment, for now:
• LivePerson, an online customer support firm whose stock closed Thursday at 11 cents, was scheduled to discuss delistment with the Nasdaq this week. The meeting was canceled. "I always thought the rule was a strange rule," says LivePerson CEO Robert LoCascio.
• Autobytel, the online car buying service, had traded below $1 for six sessions before the rule change. Thursday, it was at 72 cents. "For a company to be delisted because it's trading for less than $1 may not make sense," says Chief Financial Officer Hoshi Printer, adding Autobytel will be profitable in the fourth quarter.
• Tact, a tech-services firm, was to defend itself against delistment at an Oct. 18 meeting with Nasdaq. That has been tabled, CFO Richard Falcone says. Tact's Thursday close: 45 cents.
Big-name Nasdaq companies, such as Microsoft and Intel, might not want to be associated with a market housing so many struggling firms, says George Mairs, CEO of mutual fund company Mairs and Power.
But others insist that the predicament has more to do with market conditions than the Nasdaq. "In a bear market, we see rules like these get stretched," says Hugh Johnson, strategist at First Albany.
Keep the Faith!
M&M Man
