The Nasdaq has decided that scrips whose prices have gone below the $1 crucial limit need not necessarily be delisted. This dilution in stand by the US bourse comes a relief to Indian companies, especially the ones whose American depository shares (ADS) are trading below $1 on the tech-heavy exchange.
Confirming this, Patrick Sutch, vice-president and managing director Asia Pacific, Nasdaq told Business Standard: "It will be taken up on a case-to-case basis."
Companies which have good fundamentals and good prospects and whose prices were going down purely on the basis of negative market sentiments would be given the benefit of doubt and would not be delisted, he said. This move was in view of the current market conditions, he said.
ADS of Indian companies which have been flirting with the $1 barrier include Rediff, Satyam Infoway, Pentamedia Graphics, Mahindra & Mahindra and Tata Engineering. All these ADSs had closed below $2 on 26 September.
Sutch said that when the $1 rule was introduced around two or three years back, it was boom time at the bourses and it was thought expedient to delist those companies going below that mark.
However, he said, that companies delisted from the Nasdaq could always get their shares traded at the Over the Counter exchange so that investors would still have an exit option.
There was no need for companies to make a representation if their shares fell below the dollar mark he explained saying the exchange itself had a monitoring mechanism of the companies concerned. "We monitor the companies' performance," he said.
According to current regulations, Nasdaq sends a notice to the company telling it to shape up after it trades for less than $1 for consecutive 30 days and if a company does not get its closing share price back above the $1 level for 10 successive trading days during the next 90 days, Nasdaq sends it a delisting notice. However, company can go into appeal against the notice.
On a global basis the relaxation could lead to retaining some of the 669 or 15 per cent of the companies listed on Nasdaq, currently hovering around $1 mark.
However, any change in rules by Nasdaq will have to be approved by the Securities and Exchange Commission (SEC). After the September 11 air attacks on the United States, SEC relaxed its regulations on shares buy-back.
Meanwhile, Pentamedia and Satyam Infoway were among the major losers in the ADS market yesterday. Pentamedia ADS lost 7.41 per cent to $0.63 at 5:00 pm IST and remained unchanged until the markets closed at 4:00 pm GMT or 8:00 pm IST yesterday.
After falling below the 400 mark for three days consecutive, the Skindia GDR Index (SGI) revived back yesterday gaining 3.63 per cent to 406.54 compared to its previous close. Today at 12:30pm GMT (or 5pm IST) the SGI touched 411.06. Even with the drastic impact on the GDR/ADR prices recently, 68.05 per cent of 72 DRs are trading at a premium to their local prices.
State Bank of India was one of the top three gainers yesterday. However, it remained unchanged to $6.40 at 5:00pm IST yesterday, but it closed on a positive note gaining 13.28 per cent.
