Delistings have been top of mind for some folks lately, especially in light of steps that Nasdaq has been taking to accelerate the process for some types of non-compliance. Specifically:

– Meredith recently flagged a couple of Nasdaq proposals that – if approved – will accelerate delistings for stocks trading at low prices and for companies with low public float.

– Nasdaq amended its rules earlier this year to accelerate delistings for companies failing to meet the minimum bid price requirement.

So, a recent Deep Quarry newsletter caught my eye, where Olga Usvyatsky summarizes the most common reasons for delisting notices that are being reported on Form 8-K. Here’s what she found:

1. Listing Standards – Price, Market Value & Financial Condition. Non-compliance with quantitative listing standards, such as minimum bid price, market value, equity, or net income, comprises about 56% of the cases.

2. Late SEC Reports/Filing Deficiencies. Non-compliance with timely disclosure requirements, including a failure to file annual or quarterly reports, comprises about 21% of the cases.

3. Other – mostly M&A related withdrawals. Voluntary withdrawal requests, typically amid an M&A transaction, comprise about 16% of the cases. Note that this category refers to a voluntary withdrawal request amid a strategic decision and is not an acknowledgement of a deficiency.

4. Public-interest or SPAC-related concerns comprise about 5.1% of the cases, with common reasons including concerns about a company being a “public shell”, concerns about issuance of securities that cause a substantial dilution, Chapter 11 petitions, and SPAC-specific issues related to inability to complete an acquisition within a prescribed timeframe.

5. Governance and shareholder rights lapses category comprises about 4.5% of the cases, comprised primarily of failures to hold annual meetings (1.8% of the cases), deficient board compositions (1.4% of the cases), and failures to adopt compensation clawback policies (0.6% of the cases).

If you’re working with a company that’s received a delisting notice or is heading in that direction, I shared a template compliance plan last year that may help you chart a path out of the wilderness.

– Liz Dunshee