Update: Despite A Turnaround, Response Genetics Faces Nasdaq Delisting

| About: Response Genetics, (RGDX)
This article is now exclusive for PRO subscribers.

Summary

Response Genetics has just filed a new 8-K current report with the SEC.

I have previously documented the strong turnaround for the company, but the stock itself has yet to respond. I did not foresee the company being in this predicament.

The company intends to timely request a hearing to appeal the determination.

Response Genetics (NASDAQ:RGDX) has seen its stock plummet in the last two months on the back of heavy tax-loss selling and issues with Nasdaq listing compliance requirements. Just in time for the holidays, the company has just filed another 8-K current report with the Securities and Exchange Commission. In the current report, the company has addressed the latest Nasdaq listing requirement compliance issue. Here's what it is. Response Genetics trades below $1.00, and it was already warned about this issue. Normally, the company can file for an extension of 180 days to regain compliance, but the latest delisting determination letter also stated that Response Genetics is not eligible for an additional 180-day extension to regain compliance with the minimum bid price rule, because the company does not meet the minimum $2,500,000 in stockholders' equity standard for continued listing under Nasdaq Listing Rule 5550(b)(1). The company can request an appeal of this determination by 4:00 p.m. today on December 26, 2014, or else, its common stock will be delisted from the Nasdaq Capital Market. If an appeal is not requested, trading of the common stock will be suspended at the opening of business on December 30, 2014, and a Form 25-NSE will be filed with the Securities and Exchange Commission, which will remove the company's securities from listing and registration on Nasdaq. Response Genetics' plan would need to include a discussion of the events that the company believes will enable it to regain compliance in time and a commitment to effect a reverse stock split, if necessary. If the company appeals the delisting determination, the appeal will stay the suspension of its securities and the filing of the Form 25-NSE until the hearing process is completed.

When I covered Response Genetics in depth, I laid out a clear analysis showing the turnaround the company was undergoing. The last quarter was clearly an indication that the thesis was playing out. However, the stock has clearly moved in the opposite direction from the company. I did not see the issue with shareholder equity dropping, nor did I ever suspect the company could be in such a position after all the good news the company has had in 2014. Truly, it has been a turnaround year for Response Genetics, but hell for shareholders.

So, as one of the shareholders far underwater, and as someone who is on record recommending this stock at $0.60 and again in the $0.40 range, I am extremely disappointed by the Street's treatment of the stock. I cannot fault those taking tax-loss sales, or those who want to just get out before the company stock undergoes a reverse split and raises equity or is delisted. But here's the good news. The company intends to timely request a hearing to appeal the staff's determination. While the appeal process is pending, the suspension of trading of the company's common stock will be stayed, and it will continue to trade on the Nasdaq until the hearing process concludes and the Hearing Panel issues a written decision. The reason the stock is being hammered is that there can be no assurance that the Hearing Panel will grant Response Genetics' request for a suspension of delisting or continued listing on the Nasdaq. If its common stock ceases to be listed for trading on the Nasdaq, the company expects that the stock would be traded on the Over-the-Counter Bulletin Board on or about the same day. We will hear on this matter soon, and this is why the stock is being absolutely crushed. Losing the security of the Nasdaq is something the Street cannot tolerate, in spite of the incredibly positive things going for the company. It is a scary time as a shareholder, but as this is a speculative buy despite the issues, I have added this morning to average down. It is my belief that Response Genetics stock could be bought at these severely depressed levels, and as such, I continue to stay behind the company. If not, then it will serve as a tax loss (for tax year 2015) that will offset any future gains. Let's see what happens.

Disclosure: The author is long RGDX.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.