Nasdaq Delinquency: Bid Price?
What does it mean when a company is considered deficient in terms of its bid price? Does it have severe consequences for the company or the stock price?
- Michael KLv 51 decade agoFavorite Answer
If a company's bid price is lower than $1, it will eventually be delisted from NASDAQ which is VERY severe, since it will no longer be able to be activly traded on the Nasdaq, and it will no longer be able to raise money through issuing more stock on that exchange. It also might cause some bank loans to be called, and decrease the company's credit rating. If the company ends up going bankrupt, then, the stock price will drop to zero.
What Delisting Means for the Company
When a stock is officially delisted in the United States, there are two main places it can trade:
Over the Counter Bulletin Board (OTCBB) - This is an electronic trading service offered by the National Association of Securities Dealers (NASD); it has very little regulation. Companies will trade here if they are current in their financial statements.
Pink Sheets - Even riskier than the OTCBB, the pink sheets are a quotation service. They do not require that companies register with the Securities and Exchange Commission (SEC) or remain current in their periodic filings. The stocks on the pink sheets are very speculative.
Delisting doesn't necessarily mean that a company is going to go bankrupt. Just as there are plenty of private companies that survive without the stock market, it is possible for a company to be delisted and still be profitable. However, delisting can make it more difficult for a company to raise money, and in this respect, it sometimes is a first step towards bankruptcy. For example, delisting may trigger a company's creditors to call in loans, or its credit rating might be further downgraded, increasing its interest expenses and potentially even pushing it into the red.
I hope that helps.Source(s): http://www.nasdaq.com/about/FAQsContinued.stm http://www.investopedia.com/articles/02/032002.asp