Rite Aid Problems Mounting (RAD)

The problems are mounting for Rite Aid Corporation (NYSE: RAD).  Yesterday, the  drug store operator received a non-compliance letter from the NYSE over its shares trading under $1.00 for the last 30-day period.  The company is taking a special step to fix this issue, but it has continued issues that it require its attention.

While firms have six months to rectify this issue, Rite Aid justannounced that its board of directors has approved a reverse stocksplit.  Shareholders will have to vote in December at a specialmeeting, but the company noted that it will either conduct a reversesplit with ratios of 1-10, 1-15, or 1-20.

Late yesterday, S&P lowered the corporate credit rating down to"B-" from "B" and the outlook is still negative.  The downgrade soundslike a normal retail call as it noted that the economicdownturn could hurt prescription and merchandise demand and also calledits cash flow protection measures thin in a challenging operatingenvironment.

Traders love to see reverse stock splits.  It generally gives them a chance to short sell all over again.

Jon C. Ogg
October 17, 2008