dropped off the New York Stock Exchange, just a tad over the 15 that fell from grace in the first three months

of 2000. And the American Stock Exchange, a sister company of the NASD-owned Nasdaq, delisted 12

companies for "regulatory non-compliance" in the quarter, almost double the year-earlier period.

What's more, it's likely that worse is yet to come.

According to CommScan, a New York market-data firm, more than 300 companies on the NMS as of May 3

had traded below the required per-share value of $1 for 30 consecutive trading days. On the Big Board, the

figure stood at 26. The exchanges have other continued-listing requirements as well, including

net-asset and market-value minimums ($50 million market value on the NYSE and, with a few exceptions,

on Nasdaq. Amex's standards are lower.)

An official at a Big Board and Amex specialist firm recently counted more than 250 NYSE-listed

companies trading under $3 a share and with market values below $100 million. "These companies are

feeling vulnerable," says the official, adding that many of the companies are being wooed by regional

exchanges with lower listing requirements.

… or Ship Out

When companies fall out of listing compliance, they are generally given 90 business days to get into shape or

leave.

"I think we'll see more delistings," says Terrence Martell, a finance professor at Baruch College in New

York. "But in this extraordinary market decline, I hope the [exchange] review committees will take a careful

look at these companies' fundamentals, including cash reserves and cash flow projections, and give them

every opportunity to maintain their listings."

The exchanges will not comment on their review practices or give names or numbers of companies that

have been put on their listing watch lists. (The companies themselves generally disclose review

notices, to comply with their duty to report material events.) When the exchanges were locked in furious

listing battles in the 1980s, both the NYSE and the Nasdaq began making plans to ease their listing

requirements to build volume, causing Securities and Exchange Commission regulators to excoriate the

exchanges for engaging in "a race to the bottom."

Exchanges continue to do their best to retain companies, dedicating staff from their listings departments to work

closely with companies that show delisting danger signs. But the black eye of a delisting and the loss of a

premier capital-raising forum is most damaging, of course, to the company.

"Delisting is an awful stigma to attach to an issuer,"

says Dan Gallagher, an associate in the securities group at Wilmer, Cutler & Pickering in Washington, D.C.

Reverse Splits and Scrambles

Companies that run afoul of listing standards are ready to do all manner of acrobatics to stay where they are.

In April, drkoop.com appealed a delisting decision from Nasdaq for dropping below the minimum share price

(even as it acquired home infusion company Ivonyx). Its main tactic: It announced a 1-for-10 reverse stock split

to prop up its share price.

Shareholders balked at the move, and last month Nasdaq delisted the Internet consumer-health company.

(Drkoop has moved to the OTC bulletin board, which has no share-value requirements, but which has

significantly lower visibility than Nasdaq.)

Reverse stock splits are fairly common but a dubious prescription for retaining a listing. "There's nothing in

the rules about reverse splits," says a former official in Amex' listing department. "We didn't encourage or

discourage [the practice]; that's a corporate decision. But the historical evidence is that it doesn't work."

Delisting is "sometimes deemed as a sign that there are problems," acknowledges Gallagher, who often works

with firms having listing problems. "But when a company faces a minimum-bid-price deficiency, a

reverse stock split is almost always the one corporate action it can take to regain compliance with any degree

of certainty."

Fresh Paint

The SEC has no opinion on reverse stock splits or on other listing lifeline strategies so long as they do not

convey misleading information about a company's financials, says Belinda Blaine, associate director of

market regulation at the agency. In their roles as self-regulatory organizations, the exchanges, of course,

must tread carefully in enforcing their rules. (To rid itself of marketing-versus-regulatory conflicts, the

Nasdaq confirmed last month that it expects to spin itself off from its parent, the NASD, in a public offering

next year.)

Some market structure specialists say companies will do whatever they can to hold on to their listings. "As

companies shrink in their prospects and share price, they may trip up against exchange listing standards and

perceptions," says Lawrence J. White, an economics professor at New York University's Stern School of

Business. "To the extent that a reverse split can improve those perceptions and get the company back up

above a particular listing standard, there's nothing wrong with it–it's just a fresh coat of paint."

Whether paint can stick to silicon is another question.

The exchanges don't reveal the industries that delisted companies operate in, but it is clear that the technology

sector and its favorite exchange–Nasdaq–have hosted many of the victims. Of the 300-plus companies

CommScan cited with share prices below $1, more than 60 had a dot-com, dot-net, dot-web, or other

Internet-related designations in their names. (By contrast, none of the NYSE-traded companies on the

endangered list had those suffixes.) Nasdaq began tightening its listing requirements in 1997, a move that

had no significant impact at a time when tech companies were on the rise. With the tech-stock

collapse that began last year, however, Nasdaq delistings and delist warnings are a daily fixture.

Not that the NYSE has stood idly by during the tech revolution. In 1997, it opened a West Coast office to

woo companies from Nasdaq and to get acquainted with other listing prospects. The Big Board has no

current plans to close that office, exchange officials say. However, the pickings for listings are decidedly

slim.

"Nasdaq has dropped 67% in market value overall from its peak last March," observes Louis M.

Thompson Jr., president of the National Investor Relations Institute, the trade group for public company

IR officials. "Cisco Systems a year ago was an over $600 billion company, and today it's just over $100

billion. Obviously, it's not in danger of being delisted, but this gives you an idea of how dramatic the drop in

market value of a lot of these companies has been."

Exchanges, meantime, have their fingers crossed. They certainly don't want to force out companies, but they

also need to maintain regulatory and reputational standards. Few expect them to dilute their listing

requirements.

"Are the exchanges going to cut corners and risk their long-term reputations?" asks NYU's White. "The

temptation is always there, but my guess is they won't. They're under a lot of scrutiny and in tremendous

competition. They won't risk having the SEC or the Congress come down on them."