Sirius XM May Look to NASDAQ for Possible Exception of Minimum Bid Price Requirement
By Relmor Demitrius -
Sirius XM enters this week with a lot of uncertainty in the air regarding its status on a potential reverse split, and what are exactly the dates of interest for them in determining their listing requirements. This article will try to help answer some of those questions. As is usually the case in the investment world, private investors are left to their own devices in determining facts and processing comments from management on these touchy investment issues. Getting a straight answer out of a company on a highly volatile issue is a lesson in futility. Sirius XM can only of course give the legal answer, the guarded response, or in most cases even the obvious answer. There is potential in this situation for hints or motives of intent in regards to these issues. We know the facts of the process of getting an exception and we know Sirius XM’s stated intent and opinion on the subject.
On the issue of the reverse split to stay delisting from the Nasdaq Global Market, Mel Karmazin, CEO of Sirius XM Radio (Nasdaq:SIRI), has been very vocal. Regardless of the debate that a reverse stock split is good or bad for the company, let’s just focus on the rules and dates and comments from Mel in regards to this issue.
Mel Karmazin has stated time and time again, with absolutely no variance in his opinion, that Sirius XM will issue a reverse split,(the stockholders have voted management the authority to enact a reverse split to remain listed on the Nasdaq Global Market at any time prior to June 30th), only to avoid delisting. It has been Sirius XM’s position they the company did not want to do one.
Mel has stated that he has been working with the SEC and the NASDAQ on a possible exception.
According to NASDAQ current bid price rules, Sirius XM can have up to 7 calendar days to file a request for a hearing to seek an exception, after March 15th passes. As Mel has stated he is trying for an “extension”(it’s actually called an exception according to NASDAQ diction, of up to another 180 days from the expiration of the original non compliance period of 180 days that ends on March 15th(no one gets an exception indefinitely). Since Mel has stated he intends to fight a forced reverse split I would expect the following to occur. That gives a total of 360 days from September 17th to get the price over $1, if successful in their hearing.
As you cannot file for a hearing until a Staff Delisting Notification is given, Sirius will do nothing until March 15th, and then has up to 7 calendar days after that to file for a request for a hearing.
This statement below is pulled directly from Nasdaq.com.
“The company must request a hearing within seven calendar days of the date of NASDAQ’s delisting determination letter. If a request for a hearing is made within seven days, no delisting action will be taken until the company has had its hearing and the Hearing Panel has issued a written decision.”
These hearings are automatic, and will immediately stay the delisting until the hearing process is resolved. As we will see later in this article, this process can take a great deal of time. As have been reported or speculated, this would involve nothing to do with dropping down the the Nasdaq Capital Markets. No, they will absolutely NOT be force to enter the NASDAQ Capital Markets to do so. Doing this does give them an automatic 180 day extension from March 15th date, but I don’t not believe Mel Karmazin will choose this option. This platform my offer less volume, and in general is a risky move. He also has never hinted at this course of action either, nor is it logical in anyway they would choose this direction.
So back to the process in question.
It can take 30 to 45 days to get a hearing, and another up to 45 days to receive a verdict. At that time, a positive verdict would grant Sirius XM another 180 days from March 15th to comply.
Again, directly from Nasdaq.com.
“If the Panel determines that the company has presented a definitive plan that will likely enable it to achieve and sustain long-term compliance, it may grant the company a conditional listing, known as an exception. Exceptions are of limited duration and often incorporate milestones measuring the company’s progress in regaining compliance. A Panel has discretion to grant an exception not to exceed 180 days from the date of the Staff delisting notification.”
This means things like financial strength, historically trading well over $1, and other factors can work favorable for their situation, including their large market value.
One of the conditions must be present to consider an exception is a reverse split plan in place, and is why Sirius XM has the power already pre approved well in advance for this review process. This can EASILY be extended by a simple vote as well, and would be without a question approved by stockholders. Very little uncertainty here.
An independent panel will decide the outcome, and NASDAQ can issue papers to this panel with their opinions to the outcome. No company can receive more than 360 days from the date of non compliance, which is September 17th, 2009. Unless Nasdaq is seeking to change these rules too, which we do not have any proof of at this time, we must assume these are the rules and options available right now.
According to Sirius XM IR department, and hints from Mel Karmazin himself, and for obvious reasons that Sirius XM is a high volume trader, with a huge market cap, NASDAQ is apparently on their side. As it is not NASDAQ’s decision, they cannot give them the exception without going through this process.
Now that we have some facts to work with, there are some rumors I would like to address.
This Friday, February 12th has significance.
No it does not, as explained. The decision to file for the hearing has already been implied by Mel everytime he talks in disfavor of being forced to do a reverse split to simply save being delisted. If Sirius XM intends to seek an exception, this date has zero relevance.
March 1st. Day Sirius XM must warn stockholders of their intent to do a reverse split, giving the appropriate 15 days notice.
No relevance. Sirius XM has already stated they are seeking an exception.
March 15th. Day they will receive the Staff Delisting Notification.
It is significant, but this is neither the day they would be delisted, nor the day Sirius XM has to do or announce a reverse split by.
As we can see, there is a much longer time frame they are working with here.
Recent notice of adaptation of Minimum Bid Price rules being applied to Market Value rules by the SEC somehow affects this stock.
Absolutely not. Sirius XM was never in violation of the market value listing requirement, but the minimum bid price requirement. A notice from the SEC circulating about SEC approving new NASDAQ listing rule requirements for market value, doesn’t have any relevance to Sirius XM situation, as they were never in violation of the market cap listing requirement. Now, this could strengthen their case when going forward with this process, definitely, but that would be entirely speculation at that point.
Attempts are being made by NASDAQ to make the market cap and minimum bid price listing requirements and procedures uniform and consistent. This however does not change any existing rules that Sirius XM is working with at this time.
Although there is clear evidence to support a time frame longer than March 15th for this process, keep in mind Sirius XM has in their power to announce a reverse split at anytime they feel it is in the “best interest” of stockholders. Mel’s position is that doing a reverse split just to do one is not something Sirius XM wants to do. So as you can see they have options, if this is indeed the case. As Sirius XM is trading so close to $1 even before earnings right now, there is definite optimism abound that Sirius XM will indeed avoid the need to enact a reverse slip or even have the need to ask for a hearing, at this time. Any additional time would probably seal the deal on under $1 trading, and with plenty of time still in play, all these factors could simply be irrelevant anyway by achieving a rise over $1 and holding for 10 trading days well before March 15th, in which case no Delisting Letter would be forthcoming.
So like I said it is all meaningless. I see you are taking homers route and giving a wordy response to something I would say needs at most a paragraph.
Can and have confirmed this info for john and rel,as they always need confirmation on anything they say,and at least one of them is a basterd,can you guess which one…lol..
Good article Relmor and it explains it perfectly,so we are now saved!!!!!
Better be John. LOL
Rel, thanks for getting this important info out there! You have presented a very thorough and factual explanation of what to expect if SXM cannot meet the %1.00 rule by March 15. This is important since there are a lot of rumors and an “article” out there that are misleading. I would make one suggestion for the future though, not that I am an expert, but the article does appear to be a little long and folks may lose sight of your points..just saying you could probably get your points accros with fewer words…but overall an excellent article that is refreshing in this world of misleading and speculative headlines that are more interested in obtaining readership rather then presenting the real facts…jmpo
No problem. Really the work of all our members. I take no credit.
Isn’t this a moot point? based on this article? http://satwaves.com/blog/2010/02/07/sirius-xm-ceo-karmazin-does-it-again/
Satwaves has learned that the Securities and Exchange Commission on January 29, 2010 has approved a Nasdaq motion to extend compliance periods for listed companies that fall below its minimum bid standard, up to 360 days beyond the initial 180 day notice. The newly adopted regulation now provides a maximum 18 month period for select companies to regain compliance.
No, that article, among others is why I wrote this article. One is 100 percent wrong, one is right.
Yes thats right it better be me. Call me a basterd, call me right it does not matter.
FWIW, that’s pretty much the way I understand everything.
I was also thisclose to making the point about the recent SEC notice that came to light over the weekend. I too didn’t read it as an extension to current rules for Minimum Bid Price — but avoided saying anything, as I would have been labeled a basher again, LOL.
Anyhow, I too see a 2+ month hearing process that could give them an exception to stay on the Global Market for the remainder of the 180 days (from March 15th), or turned down where they will either be delisted or they can opt to drop down to the Capital Market and afforded the remainder of the 180 days as well. So mid September would be it.
They could also opt to challenge the delisting to the Listing Council, which doesn’t stay the process at all, but NASDAQ noted that they’ve never ruled differently than the hearing board, LOL, go figure.
I think this is all moot anyhow, it’ll be above $1 before May.
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Thx Homer, I’ve been reading here/there and think too that we may not get the “exemption” I was hoping, but it appears this will be pushed out.
Thanks for your comments Homer. I hear ya about the basher stuff, but the facts are the facts. I noticed our adjusted income is close, you have 70 to 80, i had around 95 to 100. The only difference is from that I am subtracting 68 million from interest, and only around 10 or 15 for other adjustments. I just cant see anymore. Could you break down or explain how you get the 150 million? Thanks homer, I also posted this question to you on yahoo in that thread. Thanks man, really appreciate your input.
Thx Relmor, nice summation.
No problem