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Anticipating a fight to stay listed on the stock market, Michael Dell told reporters on Sept. 12:
It is within the Nasdaq rules to follow a de-listing procedure in the case of a delay of a quarterly filing, so we would expect that that would occur, and we would expect we'll go through the process with Nasdaq -- I think there's a 180-day cycle that occurs -- and we fully expect to get this issue resolved. So, we're working, and, you know, diligently to totally resolve this.
Dell's "180-day cycle" expires on March 14. Nasdaq's listing panel has given Dell an ultimatum: file the delinquent reports by then and -- notably -- restate any past earnings as necessary, or be de-listed.
Dell doesn't think it can make the deadline. In a press release last month, Dell wrote, "The company is working diligently to file the delinquent reports with the SEC as soon as possible, but does not expect that it will be able to do so by March 14. The company plans to ask the NASDAQ Listing and Hearing Review Council for additional time to file these periodic reports, but there can be no assurance that the Council will grant the company's request."
A Nasdaq spokesman didn't want to comment on the Dell case specifically, but pointed out the stock market's listing rules. They maintain that, in light of the stock options backdating investigations, Nasdaq has determined that in some cases allowing a company to stay listed for up to 60 days past the 180-day limit -- while it sorted through thousands of pages of stock option documents and other records -- might be in everybody's best interest. That is, provided the company was taking action.
Dell, however, isn't involved in an options backdating issue. It's involved in sorting through accruals, revenue recognition and other balance sheet items. And then getting more time to avoid being delisted isn't exactly described as a slam-dunk:
"Generally, the Listing Council will not exercise its discretion to stay a . . . delisting determination," the rule states. "In determining whether to grant a stay, the Council will, among other things, consider whether the issuer acted promptly and appropriately to address the problems that occasioned the filing delinquency, including whether the issuer commenced an independent investigation and took steps to deal directly with individuals who it determined engaged in misconduct, whether the issuer has adopted appropriate remedial measures to avoid a recurrence of these problems; and whether the issuer will be able to regain compliance within the maximum time afforded by NASDAQ's rules."
What is the Nasdaq Listing and Hearing Review Council's track record?
Here is a list with five cases it decided last year on the issue of companies de-listed for not filing financial reports on time. In all five cases, the council upheld the company's de-listing.
And while some observers have suggested that Nasdaq would never de-list a company of Dell's size, due to the financial hit Nasdaq could take, here's a key fact: all of the hearing officers who will decide whether to de-list Dell or allow it to continue trading are independent of Nasdaq.
Dell's market cap is still north of $53 billion. Of technology companies in the Fortune 500, only IBM and Hewlett-Packard are ranked higher than Dell. Federal investigations continue. The stakes are high. And time is running out.
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