Kmart delisting sends stock spiraling down
December 23, 2002-- Home Textiles Today,
With its stock price trailing beneath the $1.00 mark for the past six months, bankrupt retail giant Kmart Corp. was delisted by the New York Stock Exchange, triggering a steep decline in the company's shares.
Kmart shares plunged by 31 percent in heavy trading on Dec. 17 following the Big Board's action, sinking to $0.40 a share from $0.58. The slide continued the following day, with the stock skidding down another 12.5 percent to just $0.35 a share, setting an all-time low for the mass merchant's stock.
With the delisting, Kmart said its share will be listed on the over-the-counter market under a new ticker symbols. The retailer said it's working with the exchange to ensure a smooth transition and emphasized that the delisting will have no effect on its restructuring efforts as it prepares to emerge from bankruptcy next year. The retailer has said it plans to emerge from Chapter 11 by July and to file a plan of reorganization with a U.S. bankruptcy court in Chicago by February.
Under New York Stock Exchange rules, a company is warned of a possible delisting after its stock has traded under $1.00 for 30 consecutive trading days. It is then routinely given six months to move its stock price back above $1.00. The six-month warning was meted out in July, and the delisting took effect last Thursday.
Further spooking already unsettled investors, the retailer has delayed filing its quarterly financial report with the U.S. Securities and Exchange Commission. Kmart said it is delaying filing its 10-Q quarterly report because it is restating earnings, as previously announced. The company said it will file its quarterly report — along with monthly operating reports for October and December — no later than Dec. 23.
As of Dec. 13, Kmart reported it had $244 million in borrowings outstanding, and has used $327 million of its debtor-in-possession (DIP) credit facility for letters of credit. It has $1.33 billion in borrowing still available under its DIP credit line.
The company added that it has now passed the peak borrowing period, when it purchases inventory to stock up for the all-important Christmas selling season, and has begun to repay money it had borrowed under the DIP credit line.
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