Only rarely does a company choose to jettison a lofty listing on the New York Stock Exchange or the American Stock Exchange in favor of joining the over-the-counter commoners. For one thing, getting out of an exchange listing is no simple matter. The NYSE, for example, requires 66 2/3% of the outstanding securities to approve the move, plus the failure of 10% of the individual stockholders to object to it -- an unlikely probability, since most shareholders would view such a move as akin to trading silk for sackcloth. Other ways out are circumstantial and usually less palatable, such as filing for protection under Chapter 11.
But one healthy company recently made the jump, departing the NYSE to take up a new life under the auspices of the National Association of Securities Dealers Automated Quotation system (NASDAQ). The company is 20-year-old Figgie International Holdings Inc., an aggressive outfit with interests in more than 40 businesses. Ut had been thwarted by NYSE rules from issuing a second class of common stock with reduced voting rights, which were to be used for making new acquisitions without weakening ownership. In response, the company simply thumbed its nose at the NYSE and, on July 19, 1983, began trading through the more permissive NASDAQ.
Although some analysts and portfolio managers grumbled, private investors didn't seem to mind, thanks largely to an explanatory letter sent to each of the company's 12,693 stockholders by Figgie chairman Harry E. Figgie Jr. And if anyone else looked askance at the move, it wasn't evident in the market behavior of Figgie stock, which, remarkably, held rock-steady at around $23. "We don't hear much about prestige any more," reports a Figgie officer. "We feel that we're in very good company."
Figgie's new neighborhood is the National Market System, a blandishment held out by NASDAQ as a reason to stay with -- or in Figgie's case, to cross over to -- the OTC (see text). In Figgie's case, the blandishment worked. Indeed, if NMS hadn't existed, says Figgie director of public affairs Mark Murphy, "management would have taken a very hard look at whether it was advantageous to go to OTC."
On the other hand, old-line Tampax Inc. of Lake Success, N.Y., intends to become NYSE-listed this year, after two decades of "satisfaction" with OTC treatment. The reason, says president Edwin Shutt, is that the company is in the process of diversifying from its one-product position, and would feel more comfortable in the context of other diversified Big Board corporations.
The various trading arenas also have different qualification standards. Among them are stockholder and float provisions. While the NYSE requires that a company have at least 2,000 round-lot holders and at least 1.1 million publicly held shares, and the Amex requires 500,000 outstanding shares, with 150,000 held in round lots of 1,000 or fewer, the Securities and Exchange Commission requires NASDAQ companies merely to have 250,000 shares outstanding to qualify for listing on the National Market System.
Other criteria include such diverse matters as tangible assets, capital and surplus, tangible net worth, market value, and, for the National Market System, price per share and number of market makers. But as liberal as NASDAQ historically has been, it seems to be getting looser still. A company need no longer to have been in business for five years.