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"Securities traded on a national stock exchange, regardless of price, are exempt from regulatory designation as a penny stock"[1] Blue Apron is on the NYSE [1

"Securities traded on a national stock exchange, regardless of price, are exempt from regulatory designation as a penny stock"[1] Blue Apron is on the NYSE [1]"SECURITIES AND EXCHANGE COMMISSION 17 CFR Part 240" https://www.sec.gov/rules/final/34-51983.pdf https://www.sec.gov/rules/final/34-51983.pdf

wgerard 8y ago
NYSE has minimum share price/market cap requirements, so Blue Apron will get delisted if this continues for more than 29 consecutive trading days. i.e. It could easily become one.
- rixrax 8y ago
  What happens when/if a company gets de-listed? Search engine gave me below[0]: "... company basically has two options. It can choose to trade on the Over-the-Counter Bulletin Board (OTCBB) or the pink sheets system...". Some more [light] detail in linked 'article'[0]. [0] https://www.investopedia.com/ask/answers/05/delistingofsharesowned.asp https://www.investopedia.com/ask/answers/05/delistingofshare...
  - wgerard 8y ago
    It's a bit more difficult to trade shares, and brokerages will often have restrictions on trading OTC stocks for retail investors. It's also just generally a milestone that the company is really not doing well, so investors tend to sell and recover what they can.
- lgats 8y ago
  What stops companies from repeatedly reverse-splitting the stock to keep it above $1?
  - wgerard 8y ago
    Paraphrasing from another answer: You can do that, but shareholders can also do the following in response: 1) Demand a change in leadership, a sale, or any number of significant changes. 2) Bail out en masse and sell, lowering the price even further. Few investors want to jump aboard what appears to be a sinking ship. Eventually you'll hit the minimum market cap requirement as well, at which point a reverse stock split won't save you from being delisted. Reverse stock splits simply to avoid being delisted is telling investors "we have no idea how to change direction so we're just gonna kick the can down the road for a bit". They can work sometimes, mostly for: 1) Large, established companies (e.g. AIG). Investors are more willing to believe that this is just a bad stretch for an otherwise valuable company. 2) Inherently risky and volatile industries, like Biotech. Investors are willing to roll the dice a bit more with Biotech because it is entirely possible for a "worthless" company to become very valuable very quickly (e.g. by discovering a new drug, being approved for trials, etc.). Blue Apron isn't a large company, and it's very unlikely they figure out some magic formula that makes their company significantly more valuable overnight. EDIT: For a recent example of a company reverse splitting to avoid delisting, check out Helios and Matheson (MoviePass). Even after the reverse split, they're trading for pennies a share. They're almost certainly going to be delisted in the near future.
    - dlubarov 8y ago
      > You can do that, but shareholders can also do the following in response: Why would investors retaliate over a reverse stock split though? All other things being equal, isn't it good for shareholders if the stock stays on the NYSE? > Reverse stock splits simply to avoid being delisted is telling investors "we have no idea how to change direction so we're just gonna kick the can down the road for a bit". 29 days isn't a lot of time, and even if the company quickly pivoted, they can't be sure about how the market will react. Even if the company believes they can increase their valuation within 29 days, why not have a backup plan also?
      - wgerard 8y ago
        > All other things being equal, isn't it good for shareholders if the stock stays on the NYSE? Shareholders would MUCH rather you have a plan to get back above $1/share. If this is your basement flooding, a reverse split is trying to soak it up with paper towels: It might work temporarily, but eventually you're gonna run out. Shareholders want to know you have a plan to fix the leak, or at least have a plan to call the plumber to fix it. > 29 days isn't a lot of time, and even if the company quickly pivoted, they can't be sure about how the market will react. 29 days is to trigger the delisting process. NYSE will then contact them about their plan to become compliant (which gives them an extra 10 days to respond), and basically puts them on the equivalent of a PIP (and carries many of the same implications that PIPs do). They're then held to certain financial milestones, which can result in delisting if they don't meet them. Depending on the company, the whole process can be pretty long - see, for example, HMNY which I think triggered the delisting process officially in June of this year, but obviously is still listed on NASDAQ. If Blue Apron does get delisted, it won't be until well into next year. > Even if the company believes they can increase their valuation within 29 days, why not have a backup plan also? Because it's not a plan. It doesn't improve the fundamentals of the company at all. It's an admission that you have no idea how to create more value and are merely buying time. Unless you truly believe that Blue Apron is on a great trajectory and just needs a few years for the market to catch up on that idea, a reverse stock split should anger you as a shareholder. A backup plan is to take on debt, to replace every single executive, or to seek acquisition. A reverse stock split could be part of a larger plan, but it's not a plan itself. It's a tactic.
- Wowfunhappy 8y ago
  This is still a very different statement from the one in the headline!
infecto 8y ago
Sure but its only a matter of time before they get delisted.
ChuckMcM 8y ago
They will do a reverse split, perhaps 10:1 to get the stock back up in price.
- wgerard 8y ago
  Doing a reverse split just to meet the share price requirements is generally viewed as a sign the company is spiraling out of control (i.e. investors will continue selling to cut their losses). I don't have the numbers offhand, but I would wager a large sum that companies in trouble doing reverse splits just to meet listing requirements almost always continue tumbling downwards. For a recent example, see Helios and Matheson (MoviePass). Companies that have successfully navigated reverse splits while publicly-listed (it's very common with pre-IPO companies for sure) are generally much larger and more well-known than Blue Apron (e.g. AIG), or in inherently risky businesses (e.g. Biotech companies).
  - ChuckMcM 8y ago
    Perhaps not spiraling but yes it isn't exactly a healthy sign either. It happened a lot during the dot com fallout :-) and even Sun did a reverse split 3:1 on its way out of existence. Literally though it is 'price neutral' and serves to meet investor needs (like to stay listed on an exchange) just as 'forward splits' are done, in part, to enable institutional investors to own fractions that are compatible with their portfolio goals. Always interesting to review the comments from when they went public (https://news.ycombinator.com/item?id=14464690 https://news.ycombinator.com/item?id=14464690)
    - wgerard 8y ago
      > even Sun did a reverse split 3:1 on its way out of existence "on its way out of existence" being the operative phrase there :). Either way, Sun had been a public company for 20 years at that point - Blue Apron's been one for a year. Far more reason to believe that Sun could turn it around (and AIG and similar companies), which is why it works for them and not for Blue Apron.
  - smallgovt 8y ago
webninja 8y ago
Investopedia and most finance textbooks define any security trading as less than a dollar as a penny stock. Here is why: If a stock listed on the NASDAQ fails to meet a closing bid price of $1 for at least 30 consecutive days, it is delisted. If a stock listed NYSE trades for under $1 for 29 consecutive days, the company must, within 10 days, submit a plan to the NYSE to move the stock into the $1 territory within a short period of time or it is delisted. The Nasdaq has 3430 companies. The NYSE has 3136 companies. The Amex has 322 companies. Together, the 3 make up well over 95% percent of the publicly traded stock market. Thus the problem with penny stocks is that they can be delisted and then you become a bag holder.
- brianpgordon 8y ago
  I thought the cutoff for penny stock was actually higher, like a few dollars.
  - MoBattah 8y ago
    Can be anything less than $5.
jiveturkey 8y ago
well it’s BI so it’s a given that the headline is misleading or outright wrong

wgerard 8y ago

NYSE has minimum share price/market cap requirements, so Blue Apron will get delisted if this continues for more than 29 consecutive trading days. i.e. It could easily become one.

rixrax 8y ago
What happens when/if a company gets de-listed? Search engine gave me below[0]: "... company basically has two options. It can choose to trade on the Over-the-Counter Bulletin Board (OTCBB) or the pink sheets system...". Some more [light] detail in linked 'article'[0]. [0] https://www.investopedia.com/ask/answers/05/delistingofsharesowned.asp https://www.investopedia.com/ask/answers/05/delistingofshare...
- wgerard 8y ago
  It's a bit more difficult to trade shares, and brokerages will often have restrictions on trading OTC stocks for retail investors. It's also just generally a milestone that the company is really not doing well, so investors tend to sell and recover what they can.
lgats 8y ago
What stops companies from repeatedly reverse-splitting the stock to keep it above $1?
- wgerard 8y ago
  Paraphrasing from another answer: You can do that, but shareholders can also do the following in response: 1) Demand a change in leadership, a sale, or any number of significant changes. 2) Bail out en masse and sell, lowering the price even further. Few investors want to jump aboard what appears to be a sinking ship. Eventually you'll hit the minimum market cap requirement as well, at which point a reverse stock split won't save you from being delisted. Reverse stock splits simply to avoid being delisted is telling investors "we have no idea how to change direction so we're just gonna kick the can down the road for a bit". They can work sometimes, mostly for: 1) Large, established companies (e.g. AIG). Investors are more willing to believe that this is just a bad stretch for an otherwise valuable company. 2) Inherently risky and volatile industries, like Biotech. Investors are willing to roll the dice a bit more with Biotech because it is entirely possible for a "worthless" company to become very valuable very quickly (e.g. by discovering a new drug, being approved for trials, etc.). Blue Apron isn't a large company, and it's very unlikely they figure out some magic formula that makes their company significantly more valuable overnight. EDIT: For a recent example of a company reverse splitting to avoid delisting, check out Helios and Matheson (MoviePass). Even after the reverse split, they're trading for pennies a share. They're almost certainly going to be delisted in the near future.
  - dlubarov 8y ago
    > You can do that, but shareholders can also do the following in response: Why would investors retaliate over a reverse stock split though? All other things being equal, isn't it good for shareholders if the stock stays on the NYSE? > Reverse stock splits simply to avoid being delisted is telling investors "we have no idea how to change direction so we're just gonna kick the can down the road for a bit". 29 days isn't a lot of time, and even if the company quickly pivoted, they can't be sure about how the market will react. Even if the company believes they can increase their valuation within 29 days, why not have a backup plan also?
    - wgerard 8y ago
      > All other things being equal, isn't it good for shareholders if the stock stays on the NYSE? Shareholders would MUCH rather you have a plan to get back above $1/share. If this is your basement flooding, a reverse split is trying to soak it up with paper towels: It might work temporarily, but eventually you're gonna run out. Shareholders want to know you have a plan to fix the leak, or at least have a plan to call the plumber to fix it. > 29 days isn't a lot of time, and even if the company quickly pivoted, they can't be sure about how the market will react. 29 days is to trigger the delisting process. NYSE will then contact them about their plan to become compliant (which gives them an extra 10 days to respond), and basically puts them on the equivalent of a PIP (and carries many of the same implications that PIPs do). They're then held to certain financial milestones, which can result in delisting if they don't meet them. Depending on the company, the whole process can be pretty long - see, for example, HMNY which I think triggered the delisting process officially in June of this year, but obviously is still listed on NASDAQ. If Blue Apron does get delisted, it won't be until well into next year. > Even if the company believes they can increase their valuation within 29 days, why not have a backup plan also? Because it's not a plan. It doesn't improve the fundamentals of the company at all. It's an admission that you have no idea how to create more value and are merely buying time. Unless you truly believe that Blue Apron is on a great trajectory and just needs a few years for the market to catch up on that idea, a reverse stock split should anger you as a shareholder. A backup plan is to take on debt, to replace every single executive, or to seek acquisition. A reverse stock split could be part of a larger plan, but it's not a plan itself. It's a tactic.
Wowfunhappy 8y ago
This is still a very different statement from the one in the headline!

infecto 8y ago

Sure but its only a matter of time before they get delisted.

ChuckMcM 8y ago

They will do a reverse split, perhaps 10:1 to get the stock back up in price.

wgerard 8y ago
Doing a reverse split just to meet the share price requirements is generally viewed as a sign the company is spiraling out of control (i.e. investors will continue selling to cut their losses). I don't have the numbers offhand, but I would wager a large sum that companies in trouble doing reverse splits just to meet listing requirements almost always continue tumbling downwards. For a recent example, see Helios and Matheson (MoviePass). Companies that have successfully navigated reverse splits while publicly-listed (it's very common with pre-IPO companies for sure) are generally much larger and more well-known than Blue Apron (e.g. AIG), or in inherently risky businesses (e.g. Biotech companies).
- ChuckMcM 8y ago
  Perhaps not spiraling but yes it isn't exactly a healthy sign either. It happened a lot during the dot com fallout :-) and even Sun did a reverse split 3:1 on its way out of existence. Literally though it is 'price neutral' and serves to meet investor needs (like to stay listed on an exchange) just as 'forward splits' are done, in part, to enable institutional investors to own fractions that are compatible with their portfolio goals. Always interesting to review the comments from when they went public (https://news.ycombinator.com/item?id=14464690 https://news.ycombinator.com/item?id=14464690)
  - wgerard 8y ago
    > even Sun did a reverse split 3:1 on its way out of existence "on its way out of existence" being the operative phrase there :). Either way, Sun had been a public company for 20 years at that point - Blue Apron's been one for a year. Far more reason to believe that Sun could turn it around (and AIG and similar companies), which is why it works for them and not for Blue Apron.
- smallgovt 8y ago

webninja 8y ago

Investopedia and most finance textbooks define any security trading as less than a dollar as a penny stock. Here is why: If a stock listed on the NASDAQ fails to meet a closing bid price of $1 for at least 30 consecutive days, it is delisted. If a stock listed NYSE trades for under $1 for 29 consecutive days, the company must, within 10 days, submit a plan to the NYSE to move the stock into the $1 territory within a short period of time or it is delisted. The Nasdaq has 3430 companies. The NYSE has 3136 companies. The Amex has 322 companies. Together, the 3 make up well over 95% percent of the publicly traded stock market. Thus the problem with penny stocks is that they can be delisted and then you become a bag holder.

brianpgordon 8y ago
I thought the cutoff for penny stock was actually higher, like a few dollars.
- MoBattah 8y ago
  Can be anything less than $5.

jiveturkey 8y ago

well it’s BI so it’s a given that the headline is misleading or outright wrong