Short Ideas: 2 Stocks That May Face Delisting

Includes: CYBI, WH-OLD
by: Rougemont

Stocks can be delisted from the exchanges for various reasons. Often it is for something as simple as the stock price being below a certain level that is a minimum trading price set by the exchange.

The two stocks below could be faced with delisting in the future, and might be interesting plays for shorts. I am not particularly fond of shorting stocks, especially stocks that trade for about $1, so I would not suggest starting a significant short position here; however, if you are long these stocks, you should be mindful that these stocks will likely trade lower if they are delisted.

Cybex International, Inc., (NASDAQ:CYBI) shares are trading at about 78 cents. Cybex manufactures and markets fitness equipment. These shares have traded in a range between 57 cents to $1.80 in the last 52 weeks. The 50 day moving average is about 95 cents and the 200 day moving average is about $1.08.

Why Cybex could be delisted: This company and stock is facing multiple challenges. Notably, a massive judgement of about $66 million was rendered when someone suffered permanent injury using Cybex equipment. You can read about this jury verdict in the December 8, 2010 press release from Cybex here. The company is facing possible delisting for a couple of issues. One is for trading below exchange requirements for a sustained period, which you can read about here. It overcame this default by trading for over $1 for ten days but has again fallen below the minimum $1 level. The other reason Cybex has been warned with potential delisting is because it does not comply with the minimum stockholders' equity requirement of $10 million for continued listing on the NASDAQ Global Market under NASDAQ listing rules. As of December 31, 2010, the company's stockholders' equity was approximately negative $15,010,000. You can read about this most recent notice by NASDAQ, which was issued on April 8, 2011, here.

WSP Holding Ltd. (NYSE:WH-OLD) is trading at $1.05 as of this writing. WSP Holdings is a maker of steel products and pipes for the oil and gas industry. The 50 day moving average is $1.33 and the 200 day moving average is $1.31.

Why WSP could be delisted: This company has been reporting significant losses for many quarters in spite of receiving substantial orders. The latest quarterly report from the company states:

Net loss attributable to WSP Holdings Limited was $52.4 million in the fourth quarter of 2010, compared to net loss of $15.5 million and $26.8 million in the fourth quarter of 2009 and the third quarter of 2010, respectively. Basic and diluted loss per ADS were both $0.51 in the fourth quarter of 2010, compared to basic and diluted loss per ADS of $0.15 and $0.26 for both in the fourth quarter of 2009 and in the third quarter of 2010, respectively.

You can read the full report here. I believe WSP might face delisting issues in the future because the poor financial results and heavy debt load have pushed the share price down to about $1 per share. This company has not received a delisting notice from the NYSE yet, but if the shares continue to trend lower and trade under $1 soon, this could become an issue.

Typically, the NYSE will give a company a warning after a stock has traded below $1 and then give it (usually) about 180 days to get the price back up over $1. Because of this, WSP Holdings (WH-OLD) is not at risk of delisting any time soon but this is one to keep watch on. You can read more about the NYSE minimum share price requirements here.

The data is sourced from Yahoo Finance and The information and data is believed to be accurate, but no guarantees or representations are made. Rougemont is not a registered investment advisor and does not provide specific investment advice. The information contained herein is for informational purposes only.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.