On January 12, Fairway Group Holdings Corp. (Fairway Market) filed an 8-K form with the SEC after it received a notice from the Listing Qualifications Department of the Nasdaq Stock Market five days earlier. The Nasdaq notice informed the Manhattan-based retailer that it was not in compliance with Nasdaq listing rule 5450(a)(1) because the company’s Class A common stock failed to maintain a minimum closing bid price of $1.00 for 30 consecutive business days from November 20, 2015 through January 6, 2016. While the “5450” notice has no immediate effect on Fairway’s Nasdaq listing or trading of the company’s Class A common stock, it does put the “like no other market” merchant in jeopardy of possibly being delisted.
According to the Nasdaq rule, Fairway has 180 days (until July 5, 2016), to regain compliance with the rule. If, at any time during this 180-day period, the closing bid price of the company’s Class A common stock is at least $1.00 per share or more for a minimum of 10 consecutive business days, Nasdaq will provide written confirmation to Fairway that it has regained compliance with the rule.
As we went to press on January 15, Fairway’s stock was trading at 65 cents per share. Fairway’s shares have been trading down significantly for the past 18 months and continued to dip sharply after the retailer released its third quarter sales earnings (ended September 27) in late October. Fairway lost $12 million during the period which followed a $13.9 million loss in its second quarter. Other metrics were weak, too, with overall sales plummeting 7.3 percent to $178.9 million, comp store revenue decreasing 6.5 percent, traffic declining 9.2 percent – which was offset slightly by a 3 percent increase in average basket size. With only $30 million in cash on hand, the company’s survivability has become an issue.
Now, Fairway is possibly headed toward a listing reclassification (or a full delisting) if its share price does not markedly improve. According to Nasdaq, Â in the event the retailer does not regain compliance with the rule by July 5, 2016, but submits an application to transfer from the Nasdaq Global Market to the Nasdaq Capital Market, and meets the continued listing requirement for market value of publicly held shares and all other initial listing standards of the Nasdaq Capital Market, with the exception of the minimum bid price requirement, and provides written notice of its intention to cure the deficiency during a second compliance period by effecting a reverse stock split, if necessary, then the company may be granted an additional 180 calendar days to regain compliance.
Fairway said it intends to actively monitor the bid price for its Class A common stock between now and July 5, 2016, and will consider all available options. It added that here can be no assurance that the company will be able to regain compliance with the Nasdaq minimum bid price requirement or maintain compliance with Nasdaq’s other listing requirements.
