Stock Listing in Danger – Trading lows could boot Rite Aid from NYSE
July 1, 2015 | Peter J. LaBella, CFP®
As Published by the The Patriot-News
Since 1970, Rite Aid Corp. stock has been trading on the New York Stock Exchange.
That run might be in jeopardy.
With its stock regularly trading below $1 a share, Rite Aid has warned investors that it could face delisting from the NYSE. The drugstore retailer said the NYSE requires companies to have closing prices averaging more than $1 a share for a 30-day trading period.
Rite Aid, whose ticker symbol is RAD, closed Thursday at 52 cents, down 25 percent, and has been trading at all-time lows of late.
A delisting might make trading of the stock more difficult for investors, and could affect the company’s ability to raise money on the markets.
The highly leveraged company has not been notified by the NYSE of any non-compliance issues. However, if it is notified, it said it would have six months to take action before the stock could be suspended from trading or delisted.
Spokeswoman Cheryl Slavinsky said the company would “take whatever steps necessary to regain compliance,” should a notice be issued. She would not say what options would be pursued or whether a reverse stock split — where the number of shares are reduced to increase the value of the remaining shares — would be considered.
Peter J. LaBella of FMA Advisory Inc. of Harrisburg said delisting would be a huge blow to the East Pennsboro Twp.-based company. With a delisting, the company loses liquidity, market makers and following by investors, he said.
“Financing becomes more difficult. Everything in their life becomes more difficult,” he said.
Rite Aid warned of the delisting possibility in its quarterly 10Q filing with the Securities and Exchange Commission on Wednesday. It said it had an average trading price of $1.01 for the 30-day period ending Tuesday.
Scott Peterson, a NYSE regulation spokesman, said the $1 price threshold is one of the requirements for continued listing on the exchange. Other thresholds are having a minimum number of shareholders and trading volume. Companies filing late financial statements also are subject to delisting.
Once a company receives a noncompliance letter, it has 10 days to respond and explain how it expects to return to compliance, he said. Frequently that involves a reverse stock split when it comes to pricing issues, he said.
Rite Aid added that if its stock is delisted from the NYSE, then it might have to purchase 81/2 percent convertible notes — bonds that could be converted into stock — due in 2015. It said the delisting would constitute a “fundamental change” allowing bondholders to require Rite Aid to make the repurchase.
The bonds, which were issued this year, total about $158 million.
Rite Aid said in the filing that it might have to seek additional funding to finance any required repurchase.
“We can give no assurance that we would be able to obtain such financing, on favorable terms, or at all, or that we will be permitted to repurchase the convertible notes under our other debt instruments,” the company said.
Rite Aid has about $6.2 billion of debt, although very little of that amount matures before 2011. The company took on more debt last year when it purchased the Eckerd and Brooks drugstores from the Jean Coutu Group Inc. That acquisition was completed in June 2007.
Two weeks ago, Rite Aid reported a loss of $222 million for the second quarter ending Aug. 30, and it lowered its sales and bottom line forecast for the year. It now expects sales to range from $26 billion to $26.5 billion, down from original expectations of $26.7 billion to $27.2 billion. It now expects a loss for the year of 56 cents to 67 cents a share, compared with prior guidance of a loss of 39 cents to 52 cents a share.
Rite Aid was founded in 1962 and began public trading on the American Stock Exchange in 1968. It switched to the NYSE two years later.