If a company’s stock’s minimum bid price remains below $1 per share for 30 consecutive trading days, Nasdaq will promptly send the company a deficiency notice. Nasdaq rule 5810(b) requires a company that receives a deficiency notification to make a public announcement that discloses receipt of the notification, identifies the Nasdaq rule(s) upon which the deficiency is based, and describes each specific basis and concern identified by Nasdaq in reaching its determination that the company does not meet the listing standard. In addition, SEC rules require a company that receives a deficiency notice to file an Item 3.01 Form 8-K report with the SEC within four business days of receipt, and under Nasdaq Rule 5810(b) a company can satisfy the Nasdaq disclosure requirement by filing a Form 8-K that includes all of the required Nasdaq disclosure.
Nasdaq rules provide a 180-calendar day cure period from the date of a deficiency notice based on the minimum bid price, during which the minimum bid price of a company’s stock must be $1 or more for ten consecutive business days to avoid delisting. See Nasdaq Rule 5810(c)(3)(A). If a company is listed on the Nasdaq Capital Market, the company is eligible for a second 180-calendar day cure period if it meets certain requirements. See Nasdaq Rule 5810(c)(3)(A)(ii). If a company is listed on the Nasdaq Global Select Market or Nasdaq Global Market, the company may be eligible for a second 180-calendar day cure period if it transfers to the Nasdaq Capital Market and meets certain requirements. See Nasdaq Rule 5810(c)(3)(A)(i).
Nasdaq has the discretion, based on the facts and circumstances, to require a company to satisfy the minimum bid price requirement for longer than ten consecutive business days, but generally not more than 20 consecutive business days, before making a determination that the Company has demonstrated its ability to maintain long-term compliance. Factors Nasdaq may consider include the amount by which the minimum bid price exceeds $1, trading volume, and the stock price’s trend. See Nasdaq Rule 5810(c)(3)(H).
If the company fails to cure the deficiency by the expiration of the 180-calendar day cure period, and, if applicable, the additional 180-calendar day cure period, Nasdaq will send the company a delisting determination, which triggers another required public announcement under Nasdaq Rule 5810(b), and an Item 3.01 Form 8-K report with the SEC within four business days of receipt. The Company may then, within seven calendar days of the date of the delisting determination, request a hearing to review the delisting determination, and such request for review will stay the suspension and delisting.
Oftentimes, in order to regain compliance with the Nasdaq minimum bid price requirement, a company will need to conduct a reverse stock split. Most companies wait to do this until it is necessary to do so given historical market reactions to reverse stock splits.
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