Out of compliance: How delisting distracts from a turnaround

A retail turnaround is already a complex project rife with challenges, both external and internal. From the outside, consumers can be fickle and discount-minded. From the inside, merchandise misses or operational failures require new teams and new ideas. 

Meanwhile, a retailer’s poor sales can send shares spiraling down as investors lose confidence. If the stock price gets below a certain threshold (usually $1) for too long a time, the retailer gets another item for its to-do list — a notice from the stock exchange that the price needs to recover or they’re in danger of getting kicked off. This year, several retailers in various industry segments, including Rite Aid, Pier 1, J.C. Penney and Ann Taylor owner Ascena, have faced or are currently facing a delisting. 

While a too-low share price may be the most common reason for a delisting scare, there are other paths there. For example, the stock exchanges (for most publicly traded retailers in the U.S. that means the Nasdaq or the New York Stock Exchange), stipulate that, in order to trade in their markets, a variety of criteria must be met, including a minimum number of common shares (not held by officers, directors or “beneficial owners​”) and a minimum number of “makers” (banks or brokerage companies ready with buy and sell orders).

However it happens, dealing with a delisting notice is just one more headache for a company that is almost certainly already struggling, according to Alon Kapen, a partner at law firm Farrell Fritz, who heads its emerging companies and venture capital practice group​ and has helped companies climb back into the good graces of stock exchanges.

“All this is an enormous distraction to management at a time when they’re under enormous business pressure, when they’re shutting down stores and facing the realities of the

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