Client Alert

Nasdaq Temporarily Suspends Minimum Bid Price and Market Value Requirements in Response to Market Turbulence

October 20, 2008

On October 16, 2008, Nasdaq filed a rule change with the SEC to suspend temporarily Nasdaq's continued listing requirements relating to bid price and market value of publicly held shares through January 16, 2009. The rule change is effective immediately.

Nasdaq's Continued Listing Requirements

Nasdaq rules require, among other things, that a company's listed securities maintain a $1 per share minimum closing bid price. If the company's securities fail to meet that threshold for a period of 30 consecutive business days, the company will be granted a 180-day grace period to regain compliance with Nasdaq rules. Capital Market companies and Global Select and Global Market companies that transfer to the Capital Market are granted a second 180-day grace period to regain compliance with the rules. A company that is unable to satisfy Nasdaq requirements during these grace periods is subject to delisting.

Nasdaq rules also require that a listed company maintain a minimum market value of publicly held shares. The minimum market values for the Global Select and Global Markets are $5 million and $15 million depending on the applicable maintenance standard. The minimum market value for the Capital Market is $1 million. If the market value of a company's publicly held securities falls below the applicable threshold for 30 consecutive business days, the company will be granted a 90-day grace period to regain compliance with the applicable standard. A company that fails to regain compliance with this requirement during the grace period is subject to delisting.

Temporary Suspension of Bid Price and Market Value Rules

Nasdaq suspended its continued listing requirements relating to minimum bid price and market value of publicly held shares through January 16, 2009. During the suspension period, Nasdaq will not cite companies for violations of these listing requirements. In addition, time will be tolled for companies that are currently in a grace period or in a delisting hearings process for violations of these listing requirements. Nasdaq will monitor securities during the suspension period to determine if they regain compliance with these listing requirements. During the suspension period, companies will remain subject to delisting for violations of Nasdaq's other continued listing requirements.

Following the temporary suspension period, any new violations of the bid price and market value rules would be determined using data starting on January 19, 2009. Companies that were in a grace period prior to the suspension would receive the balance of any grace period in effect at the time of the suspension. Similarly, companies that were in the hearings process prior to the suspension would resume that process at the same stage they were in when the suspension went into effect.

Purpose of Temporary Suspension

Nasdaq noted the dramatic increase in the number of Nasdaq-listed securities trading below $1 resulting from the recent market turmoil. The number of Nasdaq-listed securities trading below $1 was 64 at September 30, 2007, 227 a year later and 344 by October 9, 2008. Nasdaq further noted that there are more than 300 Nasdaq-listed securities currently trading between $1 and $2.

Nasdaq believes that there has been "no fundamental change in the underlying business model or prospects for many of these companies" and points to a general decline in investor confidence to explain the "depressed pricing for companies that otherwise remain suitable for continued listing." Nasdaq further believes that the temporary suspension will allow companies to focus on running their businesses rather than satisfying market-based requirements that are largely beyond their control in the current environment. In addition, the suspension will allow investors to buy securities of these low priced companies without fear that the company will receive a delisting notice or be delisted in the very near future.

Nasdaq instituted a similar suspension period in late 2001 in response to volatile market conditions due in part to the events of September 11, 2001.

Although the rule change is effective immediately, comments on the rule change may be submitted to the SEC until 21 days after the date the proposal is published in the Federal Register. Information on submitting comments to the SEC can be found on the SEC's website at www.sec.gov/rules/submitcomments.htm.