Emachines latest to receive Nasdaq delisting warning

The company has until March 20 to get its share price above $1 for 10 consecutive trading days, or it faces the possibility of getting kicked off the Nasdaq, according to a warning letter the exchange sent the company last week.

That could put Emachines among the 170 companies that have been delisted by Nasdaq during the first 10 months of 2000. Companies that found themselves delisted recently include eFax, BiznessOnline.com and ITC Learning.

"When there's no public market for the shares of a company, it will do serious harm to a company's ability to raise capital to grow," said Richard Cripps, a market strategist for Legg Mason. "And to the extent that they are being delisted...it's a sign of distress, which raises growing concerns among investors."

Nasdaq delists a company when its share price falls below either $1 or $5 for 30 consecutive trading days, depending on the Nasdaq criteria the company falls under. The company then has 90 days to get the price above that threshold for 10 consecutive trading days.

The volatile market has snatched away more than 75 percent of market value for a number of tech companies this year, and a rise in fourth-quarter earnings warnings has driven them further down.

Emachines has seen its share price fall from $1 in early November to 25 cents Tuesday. The company earlier this year had a 52-week high of $10.

But despite the market's steep decline since March, fewer companies have been kicked off the Nasdaq this year than last. During the first 10 months of 2000, 170 companies were delisted for regulatory noncompliance, according to the Nasdaq. That figure, however, pales in comparison to the 440 companies that were delisted for similar reasons during the bull market last year.

"It takes some time for the delisting process to go through, especially if companies fight it," Cripps said. "I think we'll see a spike of delistings next year. Also, the Nasdaq is down 30 percent in the past 30 days, and companies on the cusp have not yet caught up."

Emachines said that if it fails to comply with the requirements by the deadline, it may seek a review of the Nasdaq's decision to delist the stock or apply for listing on another market. Companies that fail to receive listing on the Nasdaq or New York Stock Exchange often rely on the over-the-counter market, which tends to be less liquid and a more difficult place to match buyers and sellers.

Company executives, however, said there are no plans at this time to seek a reverse split, which can boost the share price but has a side effect of reducing the outstanding shares in the market and a stock's liquidity. Reverse splits also have tended to be a temporary fix, getting the price above $1 to meet regulatory requirements only to have it slowly slip below the radar as the months wear on.

Companies that have seen their shares slip below $1 again after having conducted a reverse split include PopMail.com, which conducted a 1-for-10 reverse split earlier this year after its shares fell below $1 in August. The shares currently are trading around 22 cents.

News.com's Ian Fried contributed to this report.