Warning to penny stock Nortel: Do reverse stock split or face NYSE guillotine

It appears Nortel's "penny stock price status" is a clear disadvantage when it comes to being listed on the New York Stock Exchange (NYSE). According to Section 802.00 of the NYSE Listed Company Manual, the price of Nortel common stock has specifically violated Section 802.01C: "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." Nortel will be delisted from the NYSE should it fail to "cure" its stock price deficiency.

Nortel Stock Price Chart

View the full NT chart at Wikinvest

The NYSE notified Nortel of its stock price deficiency and this week Nortel officially responded: "Nortel will notify the NYSE within the required ten business day period that it intends to cure the deficiency. If the average closing price does not sufficiently improve, Nortel may consider presenting a proposal to its shareholders for a consolidation of its outstanding common shares at its annual meeting planned for spring 2009." Back on Dec. 1, 2006, Nortel implemented a consolidation (i.e. reverse stock split) of its issued and outstanding common shares with a ratio of one consolidated share for every ten pre-consolidation shares. That previous consolidation reduced the number of Nortel shares outstanding from approximately 4.3 billion to approximately 433 million. View the NYSE regulation below that the price of Nortel common stock has violated.

New York Stock Exchange Regulation: 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. In the event that at the expiration of the six-month cure period, both a $1.00 share price and a $1.00 average share price over the preceding 30 trading days 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.

Related stories: Nortel mulls bankruptcy Analyst appears to pre-announce the imminent death of Nortel: Stock price target $0


Would it be humiliating for Nortel to be delisted by the obviously "status conscious" New York Stock Exchange? After all, Nortel stockholders have already lost $300 billion of stock market value, even with a listing on the NYSE! BradReese.Com Cisco Refurbished Quotes on New Cisco Equipment One year warranty on refurbished: Cisco Aironet Cisco Power Supplies Cisco VoIP Gateways One year warranty Refurbished Cisco

  
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