Services firms in danger of stock delisting
GMT Jan 02, 2001, 11:58 PM | ET Jan 02, 2001, 06:58 PM | PT Jan 02, 2001,
New York - Over the past six months, the451 has been cluttered with bad news
about the formerly high-flying Internet services companies. At the height of
the bull market, these unproven consultants and ASPs had market caps
calculated in the billions of dollars, often exceeding companies that have
been turning a profit for years, and analysts were rushing to add them to
Today these same companies are spectacularly blowing their numbers with
regularity and drastically cutting back on staff and office space. Their
market caps have sunk into the tens of millions of dollars. The dot-com
consulting projects that originally gained them notoriety have fallen by the
wayside as their clients' funding has vanished. Any Global 2000 clients they
may have had are in the process of scaling back, delaying or canceling
outright the projects they signed up for at the peak of the stock boom.
Now some of these consulting and service companies may be facing an even
more ominous indignity - being delisted from the stock exchanges they trade
on. Although there are several criteria used to decide when to delist a
stock, both the Nasdaq and New York Stock Exchange rules call for delisting
any stock that trades under $1 for more than 30 days. At least half a dozen
Internet service companies, including iXL and Xpedior, traded today at $1 or
Even if these companies remain in the fiscal doghouse, the delisting process
will not be quick. Nasdaq will initiate the delisting procedure after a
company's stock has remained in the pennies for 30 consecutive trading days,
but the company won't get immediately bumped off the trading floor. Here's
what would happen: Nasdaq would send the company a delisting warning, and
the company would then have 90 days to resuscitate its shares. If the
company can get the stock price above $1 for ten consecutive trading days,
it gets its symbol back on the board. If it doesn't hit that target, it can
still appeal to a special Nasdaq panel. If that petition fails, it can
appeal yet again. Only after all that, would a company actually get removed
from the Nasdaq listings.
These safeguards translate into an extremely long procedure. Any stock that
truly bottomed out under $1 now would probably not be delisted until late
spring or early summer.
Nasdaq instituted the $1 rule back in 1997 in a rash of policy tightening.
The rationale was that stocks under that level were much easier to
manipulate. If any of the Web consultants were kicked off the exchange, they
could still trade their stock on the OTC Bulletin Board. The OTC, however,
attracts virtually no institutional investor interest, and those investors
make up the lifeblood of any company's financing. Any consulting company
exiled from Nasdaq and relegated to trading on the OTC should be considered
in need of lifesaving techniques beyond the capabilities of even the doctors
Xpedior, the Chicago-based Internet consultancy, tops the list of Web
service companies in grave danger. Its stock hasn't seen the sky side of $1
since November 30 and was trading at only $0.31 Tuesday. The company, which
had previously been controlled by PSINet, slashed 380 jobs in December, the
second staff reduction in four months. Xpedior previously let go of 270
employees in September. Its stock has been under $1 for 21 consecutive
Here's a list of some of the other most vulnerable companies, including
their ticker symbol and Tuesday's trading price. Also included is
information on when they first fell below the $1 threshold, how much their
share value has deteriorated over the last year (or since they have gone
public) and when they registered their 52-week low. All of these companies
trade on the Nasdaq exchange.
Breakaway Solutions (BWAY, trading at $0.97 on Tuesday) first dipped below
$1 at the end of December. Shares are down 98% over the last 52 weeks. Low
of $0.63 recorded on December 29. Breakaway offers a full line of c
onsulting services and is strong in the CRM application hosting areas.
DAOU Systems (DAOU, $0.44) first dipped below $1 in October. Shares are down
93% over the last 26 weeks. Low of $0.50 recorded on December 27. DAOU
offers IT and Internet consulting services to the health care industry and
is the possibly the most likely delisting candidate.
FutureLink (FTRL, $0.72) first dipped below $1 at the start of December.
Shares are down 98% over the last 52 weeks. Low of $0.50 recorded on
December 27. FutureLink, one Citrix's biggest partners, offers system
design, integration training and ASP services.
IXL (IIXL, $0.94) first dipped below $1 in mid-December. Shares are down 98%
over the last 52 weeks. Low of $0.69 recorded on December 20. Internet
consultant firm iXL has big name institutional investors such as Chase
Organic (OGNC, $0.72) first dipped below $1 in mid-December. Shares are down
93% over the last 26 weeks. Low of $0.50 recorded on December 27. Organic
helps customers build and operate online businesses.
Primix (PMIX, $0.94) first dipped below $1 in mid-December. Shares are down
92% over the last 52 weeks. Low of $0.40 recorded on December 21. Primix, an
Internet integrator, has a growing presence in Scandinavia.
Xpedior (XPDR, $0.34) first dipped below $1 at the end of November. Shares
are down 99% over the last 52 weeks. Low recorded of $0.25 on December 26.
Xpedior consults with both Global 2000 and Internet startups on Internet
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