Most of you probably remember the delisting trouble SCO got into because they failed to timely file their 10-K back in 2005. The same story will show up again soon, but this time for another reason: the stock price is too low to meet Nasdaq's requirements.
Nasdaq regulations require that for a stock to stay listed, it needs to be traded at a minimum price of $1.00. You can find out more about the regulations here. The relevant quantity here is the closing bid price, which is the last price a potential buyer offered for the stock. While the bid price may differ slightly from the closing price, it is still a reasonable indicator. Looking at the recent closing prices of SCOX you will notice that they closed below $1.00 for about 20 consecutive business days. After 30 business days below the minimum, Nasdaq will send a deficiency notice giving them 180 days before they face a delisting letter. During this period the company will be required to bring the stock up to the minimum for at least 10 consecutive business days.
So we see that SCO will have to do something about it, but what are the options? Or to put in in another way, what can a company do to boost its share price? Besides stopping to burn money and come up with a working business model, I mean. Such methods are commonly referred to as "corporate actions" and involve the following:
However, there is a drawback: buybacks cost cash. And cash is something SCO does not have too much of if you look at the recent quarterly results.
You see, no matter what SCO decides to do about its share price does not really help. In any case it will be interesting and fun to watch.
Copyright 2006--2011 Hendrik Weimer. This document is available under the terms of the GNU Free Documentation License. See the licensing terms for further details.