NYSE Suspends $1 Stock Price Minimum

As I'm sure you have seen by now, the NYSE has decided to temporarily suspend the $1 price minimum requirement and extend the temporary change in market cap minimum from $25M to $15M for listed companies. We received approval from the SEC yesterday and both will be in effect through June 2009.

Why would we do this and more importantly why would we choose to do this now?

I think it's safe to say that the current market conditions are unlike any we have ever seen. What started out as a problem for financial stocks has turned into a full-blown problem across all industries and around the world. Low-priced stocks have become a serious, widespread issue. Who would have imagined a world where several major blue chips in the DJIA trade around $2? And if big companies are trading at such low multiples, what does that mean for smaller companies?

To give you an example of how widespread the problem is: Bespoke Investment Group did an analysis on the S&P 500 and concluded that 27% of the index would not qualify for inclusion if being considered today. Not only that, but S&P would be hard pressed to come up with enough companies that would qualify to replace them, Bespoke said.

Trading below a dollar used to signal impending bankruptcy -- not anymore. We believe that many companies have fallen victim to broad market moves even though they continue to have solid balance sheets, revenues and growth prospects. We are proud of our partnership with our listed companies and we view this temporary suspension as a relief provision so that our issuers can remain focused on their businesses rather than be distracted by factors that are largely the result of circumstances beyond their control. Because 2009 has begun much the way 2008 ended, now seems like the best time to offer companies this relief.

Here are the links to the NYSE press release and our SEC filing.

Comments

[xsellside:]

Mid caps are the new large caps, flat is the new up.

Mar 01 01:22 AM

[GeoffreyT:]

Having a specific stock price level (rather than a market cap cutoff) is STUPID: a company could (in principle) have a market cap the size of MSFT, but have a vast number of shares issued.

In one of my favourite markets (Australia) there is no such stupidity - several stocks in the top 100 have stock prices under $5 (which would make them uninvestable for many US fund managers), and more than a few have stock prices under $1.

A low stock price IMPROVES LIQUIDITY in trade for a given market cap: you stupid Americans just love artificial rules (like the city council that mandated "pi=3"... OK, that's probably an urban myth).

How do you make a $1bn company? Easy - give a Yank CEO a $100bn company and advice from Yank investment banks, and wait for the shit to hit the fan.

Just joshin', mah fellah Merkins... now that you got The Great Off-White Hope in your imperial palace, you've got a chance of clawing back some international reputation. Off thought that you've chosen two closeted homos in a row - Brokeback Cowboy and now the Metrosexual Mulatto

Cheerio,


GT

Mar 01 02:02 AM

[boats.j:]

High and mighty words trying to put a good face on the fact that the exchange is about to become irrelevant. If they didn't change their "rules" they'd lose the ability to make ANY money. "Rules", there is a word that on Wall St has no meaning.

Mar 01 02:15 AM

[Dave Wrixon:]

Agree with GeoffryT, the rule was stupid in the first place. Like so much on Wall Street it just image over substance.

What should be done is Institutions that are effectively insolvent should be removed. I have listen to all the rubbish being talked about problems with Mark to Market, but frankly most of the problems have been caused by making the numbers up as you go along. Citibank, Bank of America, GM and Ford should all be removed from the Indexes. OK, many would argue that you cannot remove the Automobile Industry from the Index when it forms such a significance part of the economy. The bottom line, however, is that it is no longer an Industry in any meaningful sense. Detroit is not so much an Industry as a government social welfare program. Dump it. The sooner you start to get real and establish some level of transparency the sooner recovery will be possible. The biggest obstacle to recovery is that so many are living in the past and not prepared to make the huge adjustments that progress requires.

Mar 01 02:56 AM

[Mr. Ed, Jr.:]

"Trading below a dollar used to signal impending bankruptcy -- not anymore"

That is certainly good news for me and my portfolio.

Mar 01 03:19 AM

[Mad Hedge F...:]

Po Sd Welcome to the worst case scenario, with Q4 GDP revised down from -3.8% to -6.2%. Q4 will be just as bad, if not worse, then we will find a bottom. Technical analysts were ringing their hands as the Dow hit a new 12 year low and the S&P 500 broke key support at 740. Thank God I don’t believe in that mumbo jumbo. Natural gas hit a new six year low at $3.90, and even gold backed off to $928. Citigroup (C) is now so cheap at $1.40 that you could launch a hostile takeover with your American Express card. It really had the flavor of a “throw up your hands and sell everything” day.

Mar 01 08:27 AM

[ROLEXROLEX:]

If PinkSheets would be a public company, I would definitely buy it's stock.
They thrive on depressions, same as I.

Mar 01 11:54 AM

[Tad Gage:]

Don't forget the NYSE also absorbed the American Stock Exchange, which traditionally had many more micro cap and lightly traded stocks. Even in good times, a number of these companies wouldn't meet standard NYSE price or market cap requirements. Obviously, in today's market, small cap, illiquid stocks become moreso and even light selling pounds the price. It would be pretty stupid for the NYSE to not have suspended its traditional guidelines, which would have meant kissing goodbye to a lot of good Amex companies it just added.

Mar 01 02:48 PM

[Moon Kil Woong:]

100% on removing insolvent banks... ummm I mean companies, haha.

Actually, the exchanges can have oversight on companies that list. It's sad to even have to propose that an exchange should regulate the companies they list because the government fails to.

Mar 01 10:44 PM