Nasdaq Has Hundreds of Penny Stocks. Now It's Trying to Purge Them. (msn.com) 35
Nasdaq is taking steps to purge itself of dubious companies whose shares trade below $1 each, following criticism that the exchange has become home to hundreds of risky penny stocks. From a report: [...] When a stock closes below $1 for 30 consecutive trading days, Nasdaq deems the company to be noncompliant and gives it 180 days to remedy the situation. After 180 days, if the stock hasn't climbed above $1, the company can request another 180-day grace period. At the end of that second period, the company can still get a last-minute reprieve by appealing to a Nasdaq hearings panel. The delisting is stayed while the company awaits its hearing.
Some say those rules are lax, leading to a pileup of penny stocks on Nasdaq. On Wednesday, there were 523 stocks listed on U.S. exchanges that closed below $1 per share, of which 433 were listed on Nasdaq, according to Dow Jones Market Data. By comparison, there were fewer than a dozen sub-$1 stocks in early 2021. The two proposed rule changes unveiled by Nasdaq on Thursday would tighten up some of the rules regarding sub-$1 stocks, though they don't go as far as Virtu has demanded.
Under one of the proposed changes, companies that reach the end of their second 180-day grace period wouldn't be able to postpone delisting by seeking an appeal. Instead, their shares would move to the over-the-counter market -- a sort of purgatory where companies land after being delisted -- while they await the appeal. Effectively, the rule change caps the amount of time that sub-$1 stocks can be listed on Nasdaq to roughly a year. The second proposed rule change would speed up the delisting process for companies that recently did a reverse stock split. Under the change, if a company carried out a reverse split to prop up its share price, but then its stock fell below $1 within a year, Nasdaq would immediately send the company a delisting notice. The company could still appeal and remain listed for another 180 days.
Some say those rules are lax, leading to a pileup of penny stocks on Nasdaq. On Wednesday, there were 523 stocks listed on U.S. exchanges that closed below $1 per share, of which 433 were listed on Nasdaq, according to Dow Jones Market Data. By comparison, there were fewer than a dozen sub-$1 stocks in early 2021. The two proposed rule changes unveiled by Nasdaq on Thursday would tighten up some of the rules regarding sub-$1 stocks, though they don't go as far as Virtu has demanded.
Under one of the proposed changes, companies that reach the end of their second 180-day grace period wouldn't be able to postpone delisting by seeking an appeal. Instead, their shares would move to the over-the-counter market -- a sort of purgatory where companies land after being delisted -- while they await the appeal. Effectively, the rule change caps the amount of time that sub-$1 stocks can be listed on Nasdaq to roughly a year. The second proposed rule change would speed up the delisting process for companies that recently did a reverse stock split. Under the change, if a company carried out a reverse split to prop up its share price, but then its stock fell below $1 within a year, Nasdaq would immediately send the company a delisting notice. The company could still appeal and remain listed for another 180 days.
Individual share value isn't the full story. (Score:2)
It all depends on the stock volume as well and you have to look at how healthy the company is.
The stock market is just a big gamble.
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Honestly, Nasdaq should continue to list them but separate them out into their own listing, with specific criteria for how much one has to jump to get out of the category, and how low
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The message I'm getting is "Near Bear is not for real drunks" or maybe "Real Gamblers do not play slots."
SPACS, BDC, shells for reverse mergers (Score:2)
Many of these penny stocks are SPACs, BDU or reverse-mergers. They're on the NASDAQ but have less regulations on reporting earnings. The one on the OTC pink sheets have even less regulations.
More Than 25% of the Companies That Merged With SPACs During the Boom Are Penny Stocks Now
From https://www.wsj.com/livecovera... [wsj.com]
100 are $1 or less
60 are $1.0001 to $2
Add in a few Reverse Merger penny stocks too so that offshore companies have an easier way to become US listed
https://www.investopedia.com/a... [investopedia.com]
China comp
Go ahead an purge them, with zeal (Score:3)
If a company can not be bothered to take agressive meassures to get their stock back over the $1 mark (for example agressive reverse splits), they deserve to be purged ASAP.
IMHO, aside from all the meassures detailed in the article/summary, the 180 days (~6 months) should be reduced to 120 days (~4 months).
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Look up NOG too for an example. 5 years ago, sub-dollar, now hovering around $40. Wish I'd hung onto that stock for the long term, but I made a good bit of coin off them years ago.
Treating the minor symptom for the minor gamesters (Score:2)
Initial reaction is that it's just bias against poor criminals, the ones who can't afford to play for bigger stakes (and buy their own Supreme Court Justices). As the recent market crash should show, the entire stock market is seriously sick. (I would actually speculate that this little crash was only a test run for more interesting events scheduled in October...)
Interesting related reading is Going Infinite by the great Michael Lewis. It's the story of SBF, who started trading securities and derivatives
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Pardon the convoluted grammar: off whose ass is the skin from Nasdaq carrying 500 or even 10,000 companies that are moribund, in the doldrums, or even failing? Are they alleging the infrastructure isn't in place to handle the orders for these equities? For crying out loud, they handle millions of orders, on exchange, per second. The OTC markets are functional, sure, but good luck finding reliable pricing or trade information. I'd have willingly taken a huge additional loss on anything I've ever had dropped from an exchange just for the privilege of being able to see what was actually going on in the market for it prior to its dissolution, purchase in bankruptcy, etc.
It's a filter. Penny stocks tend to be where the little guys play, and the big boys don't like the little guys pretending they have any right to get into their territory. Believe it or not, penny stocks sometimes are healthy companies with decent future potential, and if they allow those to be easily accessed and traded the same as any other stock, it might slowly gain value and allow the little guys into the big boys' territory. And we can't have that.
This is just yet another move to keep the have-nots the
Re: Not great for main street investors (Score:2)
It's about the credibility of the Nasdaq itself as a place where large investments are made in decent stocks. The fact these small stocks are still on the nasdaq gives them credibility to small investors that they shouldn't really have.
Once they move to OTC mostly professionals will trade them, limiting pump and dump scams as well as letting experts take a good look at their viability.
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Which would you rather trade, though: a future or an option?
I'm not big on gambling. I leave that to the advisors and professionals, because in all honesty, I can lose money just fine in several other ways.
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OTC (Score:2)
"The OTC markets are functional, sure"
OTC? You mean I can buy the stock at the local pharmacy Over The Counter instead of having a Dr.s prescription?
Or do I need to get a One Time Code txted to my phone?
Also I live in Otter Tail County.
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Example 23andMe (Score:3)
23andMe is a great example of this...
https://finance.yahoo.com/quot... [yahoo.com]
Penny Stocks Are Fine (Score:3)
This penalizes risk taking (Score:2)
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the government bailed out Tesla and SpaceX or they'd be dead long ago... now they are opposing bailouts (for others) but for tax breaks and deregulation... Typical i got mine, so FU.
A friend of mine (Score:5, Interesting)
... was convinced to invest in a penny stock. Lo and behold, it soon jumped up in price and he was a few thousand in the green. He bragged about it, and I suggested that he sell some to get most or all of his initial investment out. But he was greedy and instead he dumped his entire retirement savings into it.
Shortly thereafter he was up several hundred thousand dollars on paper and had big dreams about how he would spend all that money. Again I cautioned that he should pull out his investment but no, he let it all ride. A week later the stock went to near zero and he had lost all his money.
My sense is that most of the penny stocks fall into this category, they are merely pump-and-dump scams that should be purged from the market.
I know a guy (Score:2)
Jordan Belfort could move those stocks.
Under $20 is s Penny Stock (Score:2)
Why not move them to a new exchange? (Score:2)
If Nasdaq is SO worried about low stock values "tainting" their image why not just move them to a different exchange?
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That's what they're doing. Bye, you're not welcome here, go find somewhere else.
It's like Amazon kicking someone off for selling phone chargers that light your house on fire.
There's gold in them their hills. Maybe. (Score:3)
Digging into these delisting deals you can occasionally find a bit of yield hiding in them. e.g. Westell delisted a few years back by doing a 1000-to-1 reverse stock split and buying back any leftover shares at a specific price. (I think it was $0.90, but I honestly don't recall.) I was able to pick up 999 shares at below the strike price and a 17% yield on the deal. (I'm also now party to a class action lawsuit by another shareholder, but the lawyers get all the money out of that.)
Takeaway: Read the nuts and bolts of delisting deals and see if there's money to be made. Just don't get caught holding the over the counter/pink sheet illiquid securities after delisting. The bid/ask spread is awful trying to get rid of those, if you can find a market maker willing to do the deal at all.