November 21, 2008

“Breaking the Buck” for Listed Companies

A few weeks ago, I noted how Nasdaq had made a rule filing with the SEC seeking to temporarily suspend the exchange’s bid price and market value of publicly held securities continued listing requirements until January 16, 2009. The SEC waived the 30 day wait for effectiveness of those rule changes, thereby giving some Nasdaq issuers immediate relief from delisting.

Some members have asked whether the NYSE has taken similar steps or is contemplating similar action with respect to its analogous listing standards. To date, no action has been taken by the NYSE to suspend the application of its minimum price and market value listing standards. The NYSE’s standards require that the average closing price of any listed security not fall below $1.00 per share for any consecutive 30 trading-day period and that a listed issuer maintain a minimum level of average global market capitalization of $25 million over a consecutive 30 trading-day period.

During our recent webcast – “The NYSE Speaks ’08: Latest Developments and Interpretations” – the NYSE Staff indicated that they had given the issue some consideration but had decided not to take any action. The NYSE Staff noted that while there had been an uptick in the number of listed companies falling below the $1 threshold, that number still a represented a very small proportion of the overall number of NYSE-listed companies. I suspect that the NYSE Staff will continue to monitor events to see if any action on this front is warranted.

With this week’s market action and perhaps more share price declines to come, some big listed companies may need to start thinking about how to avoid running into a delisting problem. For instance, venerable Ford Motor Company’s 52-week low was $1.01, closing yesterday at $1.39. General Motors has previously hit a 52-week low of $1.70, but closed yesterday at $2.88. It may be time for these and other companies to start looking into reverse stock splits, repurchases or any other potential alternatives to keep from breaking the buck.

What Happened to the Credit Rating Proposals?

On Wednesday, I mentioned that the SEC was going to consider adoption of proposed rules regarding regulation of credit rating agencies, but that item was deleted from the agenda right before the open meeting. Now, the SEC plans to take up that rule proposal as well as the package of other rule proposals regarding credit ratings at an open meeting on December 3rd. Presumably that will include proposals to replace the investment grade non-convertible debt securities transaction requirements in General Instruction I.B.2 of Form S-3 with essentially the WKSI debt issuer standard.

Now, as the “twilight” rulemaking of the Administration is starting to draw to a close, we still don’t know the fate of some other proposals remaining out there – such as XBRL and proposed Rule 507 of Regulation D.

SEC General Counsel Brian Cartwright, has announced that he is leaving the SEC to return to the private sector. He plans to stay on for an unspecified period of time for “continuity” purposes.

Perks Gone Awry

Who would have thought planes would have helped to potentially push the auto industry off the edge? As noted in this Washington Post article, the CEOs of the Big Three automakers got an earful from members of Congress about their use of company planes to get to this week’s hearings in Washington, DC. The funny thing is that the CEOs weren’t using the company planes as perks, because clearly their trips to DC were integrally and directly related to a business purpose – saving their companies from the brink of disaster. If anything, the fiasco demonstrates why perks disclosure gets so much attention these days, even though the numbers involved are relatively small.

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– Dave Lynn