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BN.com Faces Nasdaq Delisting

By Keith Regan
Aug 15, 2002 10:50 AM PT

The Nasdaq stock exchange has given BarnesandNoble.com just over two months to either boost its stock price or face delisting, an often fatal blow to a public company's fortunes.

BN.com Faces Nasdaq Delisting

BN.com, which launched a US$420 million IPO in the dot-com heyday of 1999, received the warning notice because its stock price remained below $1 for 30 consecutive days.

In a filing with the U.S. Securities and Exchange Commission in which the company disclosed the delisting threat, the New York-based e-tailer -- which is partly owned by Barnes & Noble and Bertelsmann AG -- said it is evaluating options for boosting its share price.

In the SEC filing, BN.com said it has enough cash to operate for another year. The company did not respond to a request for comment.

Bad Omen?

Delisting often signals a company's collapse because it all but erases its chances of raising capital through stock sales. For example, delisting spelled the beginning of the end for several now-defunct e-tailers, including Webvan, eToys and Egghead.com.

"Once a firm gets to that point, the chances of raising more cash are close to zero," Forrester analyst James Crawford told the E-Commerce Times. "It requires a white knight or some other cash source to sustain the company at that point."

Not all delisting notices prove fatal, however. Homestore.com was able to retain its spot on the exchange after coming clean on the accounting sleight-of-hand that forced the company to restate two years of earnings.

Another company, Tickets.com, is one of a handful of firms that successfully used a reverse stock split to remain listed on the Nasdaq. And Buy.com was delisted but continues to operate as a privately held firm.

Much-Needed Reprieve

Last fall, the Nasdaq gave scores of technology firms a much-needed reprieve by suspending its delisting rules after September 11th. Those rules went back into effect at the start of the new year.

BN.com does have some potential saviors in its two larger owners, Barnes & Noble and Bertelsmann AG. But neither company has moved to prop up the dot-com's stock during its latest slide from a yearly high of more than $2.

Not surprisingly, delistings have become increasingly common in recent years. As of June, 125 companies had been kicked off the Nasdaq exchange in 2002, which booted 390 firms last year and 240 in 2000.

In early trading Thursday, BN.com shares fell another 5 percent to 71 cents.

Trend Setter

Ironically, Barnes & Noble has been credited with breaking ground in what is now one of the most solidly entrenched ideas in e-commerce: brick-and-click integration.

For example, the chain was one of the first to install store-based Web kiosks and to let customers return online purchases to stores. That concept has since been adopted for use in a partnership between Amazon and Borders.

But BN.com has continued to lose money. Analysts recently raised the prospect that the company could be losing additional market share to Amazon, whose book sales have begun to grow again after a period of stagnation.

Not Certified Yet

Meanwhile, BN.com is one of many companies that has been asked by the SEC to verify its earnings statements. The commission has ordered the CEOs and CFOs of more than 900 U.S. corporations to certify their companies' earnings.

BN.com has complied with the SEC's order, as have several other e-commerce companies, including Amazon, E*Trade and AOL Time Warner.

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