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Overland off Nasdaq non-compliance hook - for now

Nasdaq withdraws letter

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Struggling data protection vendor Overland Storage has avoided being booted off the main Nasdaq index because of its weak share price and market capitalisation. It's now off the delisting hook "because the company currently meets an alternative maintenance standard."

On February 19 Overland received a Nasdaq Staff Deficiency Letter saying that it did not comply with the minimum shareholders' equity requirement of $10m for continued listing on the Nasdaq Global Market. It was given 5 calendar days from the date of the letter to submit a plan to regain compliance, or, alternatively, to elect to transfer listing of its common stock to the Nasdaq Capital Market. That's what the Overland board chose to do.

Now Nasdaq has belatedly realised that the deficiency letter doesn't apply because Overland meets an alternative listing maintenance standard, partly because of moves by Nasdaq itself: "Overland's compliance with the alternate maintenance standard is enabled in part by Nasdaq's current suspension of the standards relating to minimum bid price and market value of publicly held shares. The company was in a permitted re-compliance period for the minimum bid price standard at the time those standards were suspended, thereby extending the re-compliance period for the length of the suspension."

Are we to interpret this as saying that Nasdaq sent the Feb 19 deficiency letter in error? It would appear its own rules are too complex for it to interpret them correctly.

Nasdaq Global Market rules require a company's share price (minimum bid price) be consistently higher than $1 and that its market capitalisation be higher than $10m. Overland's share price fell below the bid price requirement and it received a notice of delisting letter in October last year. Overland decided to do a reverse stock split and get its share price above the $1 benchmark by adding shares together so that a summed number of shares would have a value above the dollar mark.

This was the plan when it received the market capitalisation deficiency letter on February 19.

Overland is still on the hook for the minimum share price requirement, and the reverse stock split is still expected to be the answer to that problem. The shares are currently trading at $0.24 and the company is capitalised at $3.07m. A 5-way reverse split would take the shares to $1.20 - not a lot of headroom for a deepening or prolonged recession there - whereas a 10-way split would take them to $2.40, which looks healthier. The actual split number has not been revealed by Overland yet.

Overland has recently undergone several rounds of restructuring and has appointed a new CEO, Eric Kelly, to help it trade its way out of the mire. The company may still transfer to the Nasdaq Capital Market with its less onerous requirements but its ticker identification of OVRL would not change. ®

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