Staff Writer

In response to the continuing market meltdown, the Nasdaq Stock Market granted a three-month suspension of its minimum bid price and market value requirements for continued listing.

The reprieve should help hundreds of companies avoid immediate delisting, including several biotechs. At the end of the third quarter last year, 64 Nasdaq-listed securities were trading below the $1 minimum bid price. This year, that number jumped to 227 securities - and an alarming 117 more fell below the minimum the following week.

In addition to the 344 securities trading below the minimum by Oct. 9, more than 300 additional securities were trading in the danger zone between $1 and $2. Similarly, the number of companies failing to meet market value requirements more than doubled between Jan. 1 and Sept. 30.

Yet Nasdaq believed the failures to meet its listing requirements were "due to recent severe market conditions, as opposed to any changes in [the companies'] underlying business model or prospects," a Nasdaq spokesperson said in an email interview.

So on Oct. 16, Nasdaq filed a proposed rule change with the SEC to grant a three-month suspension in the enforcement of its minimum bid price and market value requirements. The proposal immediately was declared effective and will remain in effect through Jan. 16, with the rules being reinstated on Monday, Jan. 19.

A similar suspension was imposed during the market decline that followed the tragic events of Sept. 11, 2001.

During the suspension, companies will not be cited for new concerns regarding deficiencies in their bid price or market value, and companies already notified of a deficiency that are in the compliance process will not be delisted and will receive a three-month extension to their timeline for regaining compliance, assuming all other listing requirements are met. Deficient companies still may regain compliance during the suspension.

Normally, a Nasdaq-listed security is considered deficient if its closing bid price falls below $1 for 30 consecutive business days. Compliance can be regained by achieving a closing bid price of $1 or higher for 10 consecutive business days. Companies trading on the Capital Market have 180 days to regain compliance, after which they can get another 180 days if all other listing requirements are met. Companies trading on the Global Market get 180 days and may then transfer to the Capital Market for another 180 days.

The minimum value requirements for continued listing include stockholders' equity of $2.5 million, or a market value of $35 million or net income from continuing operations of $500,000 in two of the last three most recent fiscal years. A company becomes deficient after 30 consecutive business days of insufficient market value and has 90 calendar days to regain compliance by remaining above the minimum for 10 consecutive business days.

Nasdaq's suspension of the bid price and market value minimums applies to issuers of common stock, preferred stock, secondary classes of common stock, shares or certificates of beneficial interest of trusts, limited partnership interests, American Depositary Receipts and their equivalents.

In its SEC filing, Nasdaq said it hopes the suspension will help restore investor confidence by allowing investors to make decisions without the overhanging threat of a very near-term delisting. Additionally, the suspension is designed to allow companies to focus on running their businesses rather than satisfying market requirements that are largely beyond their control.

Nasdaq said it will consider further revisions and monitor the effect of the markets in the coming months.