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Dot-coms&#039 latest worry: Nasdaq delistings

A dot-com's worst fear used to be running out of cash, but with many stocks floundering, ailing e-tailers face a new threat: Nasdaq delisting.

According to the Nasdaq's regulations, a company can be de-listed if its stock languishes too long under $1. Or $5, depending on the company's qualifications when it listed. When a company first lists, it can fall into one of three categories, depending on its financials. Though it's difficult to find out which category a company is in -- there is no public record, and all communications between the Nasdaq and an issuer are confidential -- there are enough dot-coms hovering around $1 to signal trouble ahead.

"It's not a concern of ours," said John Cummings, director of investor relations at Pets.com (Nasdaq: IPET). The e-tailer's stock has been trading under $1 for seven days, and Cummings said he's just started looking in to de-listing regulations.

"It's an interesting phenomenon with our stock," Cummings said, explaining that the August 9 lock-up of 13.5 million shares flooded the market, and led to the stock's recent decline. He's been told by the company's listing agent that there are no "hard and fast rules," and that the Nasdaq might exempt them from the de-listing rules based on these "technical" issues. He said the fact that Pets.com has over $70 million in net tangible assets, far above the minimum of $4 million required by the Nasdaq, should also help keep it listed.

Wayne Lee, a Nasdaq spokesperson, said that a company can appeal. Although there are exceptions, the general rule is that after a company has been below $1 for 30 consecutive business days, it will get a warning from the Nasdaq. At that point, the company has 90-day window to bring its stock price back to the minimum level, and keep it trading there for 10 consecutive business days.

At that point, the company is likely to be forced off the exchange -- unless it goes the way of Value America (Nasdaq: VUSA), which halted trading August 14th after the company filed for bankruptcy protection and announced the closure of its e-commerce Web site.

If Pets.com's stock does remain under $1 for over 30 days, Cummings said there are two options the company might pursue: going proactive on media and investor relations, or doing a reverse stock split. This is something he hasn't even discussed with the company's CFO yet, Cummings added.

Other companies which are under $1 include E-Stamp (Nasdaq: ESTM) and BigStar Entertainment (Nasdaq: BGST), which have been trading below $1 for 6 and 21 days, respectively.

Those under $5 include Ashford.com (Nasdaq: ASFD), barnesandnoble.com (Nasdaq: BNBN), Cyberian Outpost (Nasdaq: COOL), eToys (Nasdaq: ETYS), dELiA*s (Nasdaq: DLIA) and its recently reacquired spin-off iTurf (Nasdaq: TURF).