The Under $1 Club

Faced with the potential delisting of several elite Nasdaq 100 stocks, the Nasdaq Stock Market appears likely to waive its $1 a share listing requirement for the rest of the year.

Unlike the dot-coms that have so far led the parade of stocks banished to the over-the-counter market, the next wave is likely to be led by heavily financed infrastructure and telecom firms.

Nasdaq 100 stocks trading for less than $1 include: [email protected] , Exodus , BroadVision , McLeod , Metromedia Fiber Network and XO Communications . CMGI closed yesterday exactly at $1.00.

That’s 6% of the Nasdaq 100 threatened with delisting, with CMGI right around the corner. At least two of those stocks – McLeod and XO – went back to the bond market for additional funding earlier this year, and Metromedia has secured substantial additional funding in recent months. BroadVision was until recently an S&P 500 stock. Exodus and [email protected] are expected to file for bankruptcy, so they face problems other than share price.

The rule that stocks must not trade below $1 for 30 straight days was intended to avoid the manipulation that penny stocks can face. Waiving the rule gives companies a break from the brutal downturn in technology investment and time to determine the effect of the September 11 terrorist attacks. It allows those companies to maintain the greater access to investors and analysts that a National Market listing provides, and it also curries favor with the big firms that manage stock and bond offerings.

And most of all, it will help the Nasdaq’s bruised prestige if it can avoid delisting stocks from its elite Nasdaq 100.

Among these very low-priced companies, however, there are some interesting situations. One notable one is Corvis , which closed yesterday at $1.40 a share. With a $500 million market cap and more than $700 million in cash, Corvis appears to have plenty on hand to survive the telecom shakeout, even if it extends into 2003. That doesn’t mean that CORV stock won’t keep heading lower, however, particularly if the Nasdaq continues down, but it might be worth a look when the market eventually bottoms.

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