The New York Stock Exchange has formally notified Nortel Networks Corp. that it doesn't meet the exchange's minimum price rules, meaning the company could be forced to boost its stock price sooner than planned.
On Wednesday, Nortel broke through the floor of the minimum price criterion set by the exchange. On Friday, the NYSE formally notified the company that it was in violation of the requirement.
The NYSE price rule requires that an issuer's stock not fall below an average of $1 (U.S.) a share for the previous 30 consecutive trading days. Nortel's share price in New York fell below that threshold last Wednesday.
According to the rules of the exchange, a company must restore its stock price within six months of receiving formal notification.
That gives Nortel a deadline of March 27. Last week, though, Nortel said it would boost the share price through a stock consolidation, also known as a reverse stock split, that would be put to a shareholder vote at the company's next annual meeting. Nortel's annual meetings are historically held in mid-to-late April, too late to meet the NYSE deadline.
The NYSE would not comment yesterday except to say that the exchange has broad discretion on the enforcement of the rule.
A spokesman for Nortel could not immediately say if the NYSE rule would affect the timing of any of the company's initiatives to boost the stock price.
Nortel closed at 52 cents yesterday in New York, down 2 cents or 3.7 per cent on the day. In Toronto, Nortel ended at 83 cents (Canadian), up 4 cents or 5 per cent.
The 30-day average closing price of Nortel's stock in New York was 94 cents (U.S.) after yesterday's trading.
On Wednesday, shortly after Nortel was in violation of the listing criteria, Nortel's board of directors met in Washington and approved a share consolidation plan that, if shareholders agree, will result in an as-yet-unspecified number of Nortel shares exchanged for one Nortel share. The net result of the share consolidation, Nortel said, will be to set the price for its New York shares at between $10 and $20 apiece.
Under the rules by which the exchange operates, the issuer — in this case Nortel — must disclose that it has received formal notification from the NYSE within 55 days of the notification.
Nortel said last Thursday's press release satisfies that rule, even though the company had not yet been formally notified when its statement was issued.
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