A Sign of The Changing Times – NYSE Considers Further Delay of $1 Minimum Stock Value Rule
For years the major stock markets have always moderated potential listings by only allowing companies with a certain dollar value per share or minimum market cap; or both. Now with the stock market falling to 12 year lows the stock markets are suspending rules that limit small companies on the exchanges.
Amid a growing number of companies under $1 the NYSE will not enforce a rule requiring that listed companies maintain a minimum share prices until April 1. But now that may soon change as the exchange looks towards extending the deadline to prevent the inevitable problem of many companies simply “falling off the map.”
Current NYSE rules de-list a company if the share price falls below $1 for any period greater than 30 days. At that point the stock market stops trading the company and it is forced to move to a lesser exchange or go to OTC trading.
The NASDAQ stopped enforcing minimum values in October 2008. Generally the exchange only allows companies with a share price greater or equal to $1 and maintains a minimum market cap of $5 million.
Currently 133 companies are in the danger zone with share prices below $2. Ford and AIG are some of the bigger names but many small time operations with typically lower stock prices are also nearing the minimum threshold.
I lost a good deal of money like most people in the market. I started to regain some of my money in tax certificates. So far it’s been much more stable for me.
A lot of these “rules” the NYSE and others are doing will have little to no long term effect on the market overall, so I don’t really see the point in it. Like when they banned short selling, it really ended up doing no good.
And not really changing much at all. I’m continuously amazed with the number of frauds, “accounting errors”, etc. We’re headed down a slippery slope of regulation that frankly hasn’t done much for us in the past.
The $1 rule is only important for maintaining the “quality” of shares available on the exchange and to make sure that the one location ice cream stand down the street doesn’t list on NYSE. Most mutual funds cannot buy shares under $5 or $10 dollars depending on the firm, so for all intents and purposes a share price of less than $1 is already in the land of obscurity.