Xceed Looks to Avoid Delisting with Reverse Stock Split

In a bid to avoid delisting from the Nasdaq exchange, New York-based interactive shop Worldwide Xceed Group announced a one-for-ten reverse stock split in order to get its 15-cent share price above the $1 benchmark bid.

But in early trading Wednesday, the measure doesn’t appear to be helping the company’s strategy. With the one-for-ten reverse split behind it, the stock price bumped to $1.56 just after opening on the Nasdaq exhange. But by press time, the price had slipped 56 percent to 68 cents.

With shares trading more than 100 percent below the year-high of $44.62, the consulting firm has until April 5, 2001 to maintain a bid price of at least $1.00 per share for ten consecutive trading days to avoid being booted from the Nasdaq.

As a result of the reverse split, each ten shares of common stock were converted into one share. The company said the move would not affect the rights and preferences of its shareholders. For the next 20 days, Xceed’s stock will trade under the symbol XCEDD.

Reverse stock splits, while uncommon, are used by publicly-traded companies to prop up a depressed share price and reduce its outstanding shares. But the Nasdaq generally frowns on the practice.

Last year, faced with a similar Nasdaq delisting warning, New Jersey-based Web incubator Grove Strategic Ventures implemented a one-for-five reverse stock split which bumped the company’s share price above the $1.00 mark for the first time in more than three months. But the price eventually slipped below a buck and the company was delisted. Grove now trades on an over-the-counter bulletin board.

Xceed has been in the throes of a company-wide restructuring that included the departure of chairman Scott Mednick. The company’s share price first slipped below the $1.00 mark in early October last year and has been on a downward slide ever since.

Delisting from the Nasdaq exchange is a common daily occurrence, but this mostly happens when a company gets bought by another firm and adopts its acquirer’s ticker symbol.

Listing on the Nasdaq exchange is particularly useful for the public relations value it offers. An exchange listing allows press releases and other company announcements to be widely circulated.

Like its competitors in the space, Xceed has faced the struggles of a softening public market for interactive agencies.

The company’s market cap has dwindled to around $7.5 million and with EPS losses widening from quarter to quarter, the road ahead for Xceed looks to be filled with potholes as it works through the cost of goodwill impairment from the cost of past acquisitions.

For its twelve-month accounting period ending August 31, Xceed reported a net loss to common shareholders of approximately $173.8 million, or $8.30 per share. The fiscal year-end loss from continuing operations includes write-offs on doubtful accounts (mostly dot-coms that couldn’t pay) of $9.3 million.

In addition, law firms have been hitting the business wires in the past couple weeks, giving notice of shareholders’ intent to seek class action status for purchasers of Xceed’s common stock between Nov. 29, 1999 through Nov. 15, 2000.

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