Astra has lost more than 90% of its market value as of August 24, 2022. As Astra's stock price continues its downward plummet, their stock price has passed below the $1 minimum bid price requirement to be listed on the Nasdaq. This puts the company on the path towards being delisted.
If Astra's stock price trades below $1 for 30 consecutive business days, the company will be notified that they are non-compliant with Nasdaq listing requirements. They will be given 180 calendar days to become compliant. If after 180 days the company is still not compliant, they will be notified that their company will be delisted. The company may be allowed another 180 calendar days under specific circumstances. Details on the process are provided in following sections.
How did Astra end up like this? For details, please see the article Insights into Astra Space.
Nasdaq Company Delisting Process and Timelines
What is Nasdaq's compliance process for companies failing to meet the $1.00 minimum bid price requirement?
If a company trades for 30 consecutive business days below the $1.00 minimum closing bid price requirement, Nasdaq will send a deficiency notice to the company, advising that it has been afforded a “compliance period” of 180 calendar days to regain compliance with the applicable requirements.
Thereafter, if such a company does not regain compliance with the bid price requirement a second 180-day compliance period may be available. A company listed on the Nasdaq Capital Market may be eligible for an additional 180-day compliance period if it meets the market value of publicly held shares requirement for continued listing, all other initial inclusion requirements for the Capital Market, except for the bid price requirement, and provides written notice that it intends to regain compliance with the bid price requirement during the second 180-day compliance period, by effecting a reverse stock split if necessary.
How does Nasdaq measure the bid price of a security?
Nasdaq uses the consolidated closing bid price to determine whether a company complies with the bid price requirements for continued listing.
How does a company regain compliance with the minimum bid price requirement?
In order to regain compliance with the minimum bid price requirement, a security must have a closing bid price of $1.00 or more for 10 consecutive business days.
Under certain circumstances, to ensure that the company can sustain long-term compliance, Nasdaq may require the closing bid price to equal or to exceed the $1.00 minimum bid price requirement for more than 10 consecutive business days before determining that a company complies. In determining whether to look beyond the 10 days, Nasdaq will consider, but is not limited to, the following factors:
- Margin of compliance (the amount by which the price is above the $1.00 minimum standard);
- Trading volume (a lack of trading volume may indicate a lack of bona fide market interest in the security at the posted bid price);
- The market maker montage (e.g., if only one of eight market makers is quoting at or above the minimum bid price and the quote is only for 100 shares, then added scrutiny may be appropriate); and
- The trend of the stock price (is it moving up or down?).
Does Nasdaq accept reverse stock splits as a method to regain compliance with the minimum bid price requirement?
Yes. Nasdaq views reverse stock splits as an acceptable method to regain compliance.
Is there a limit to the number of times a listed company may effect a reverse stock split to maintain or regain compliance with the bid price requirement?
While Nasdaq rules do not impose a specific limit on the number of times a listed company may effect a reverse stock split to maintain or regain compliance with the bid price requirement, a series of reverse stock splits may undermine investor confidence in securities listed on Nasdaq, especially where the reverse stock splits follow dilutive transactions. Accordingly, Nasdaq may determine that it is not in the public interest to maintain the listing of a company that has effected a series of reverse stock splits, even if the company is in compliance with the minimum price requirement as a result of those reverse stock splits. Similarly, Nasdaq may determine that a series of dilutive transactions, which result in a sustained decline in the securities price, raise public interest concerns, even where the company otherwise complies with all applicable rules, such as the shareholder approval and notification requirements.
What happens if a company does not regain compliance with the minimum bid price requirement during the compliance period?
If a company is unable to resolve its bid price deficiency during the applicable compliance period, Nasdaq Staff will issue a delisting letter. At that time, the company may request a hearing before a Hearing Panel, which will stay the delisting. The company will have the opportunity to present its plan to regain compliance to the Panel. This plan of compliance should include the implementation of a reverse stock split in the near term. In appropriate cases, and so long as a company commits to implementation of a reverse split within 180 days of the delisting notification, Panels may also consider other factors, such as the company's fundamental financial strengths and weaknesses, the overall market conditions, the company's historical bid price, and impending disclosures, corporate actions and strategic business plans that the company believes may impact its bid price.
What is a Reverse Stock Split?
When a company completes a reverse stock split, each outstanding share of the company is converted into a fraction of a share. For example, if a company declares a one for ten reverse stock split, every ten shares that you own will be converted into a single share. If you owned 10,000 shares of the company before the reverse stock split, you will own a total of 1,000 shares after the reverse stock split.
A company may declare a reverse stock split in an effort to increase the trading price of its shares – for example, when it believes the trading price is too low to attract investors to purchase shares, or in an attempt to regain compliance with minimum bid price requirements of an exchange on which its shares trade. In some reverse stock splits, small shareholders are “cashed out” (receiving a proportionate amount of cash in lieu of partial shares) so that they no longer own the company's shares. Investors may lose money as a result of fluctuations in trading prices following reverse stock splits.
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