An Ambac Delisting? Or Reverse Split? (ABK)

Ambac Financial Group, Inc. (NYSE: ABK) has made an SEC filing discussing this week’s press release about receipt of a notice from the New York Stock Exchange that it has fallen below the exchange’s continued listing standard.  This is of course related to the price of its common stock being under $1.00. The NYSE requires an average closing price to be above $1.00 over a consecutive 30-trading day period.  As of Tuesday, that average price was $0.94 per share over the prior 30 days.

Today, the company noted that it has informed the NYSE that it intends to resolve the issue and bring its share price and average share price back above $1.00 per share.  This won’t of course bring up any immediate delisting action, and companies are often able to appeal and able to get extensions once or twice after the first notice.  The company has six months from the date it received the letter.

Ambac said that it is “currently in the process of evaluating the potential options available to it for curing this deficiency.”  There are several ways this can occur.  First, the company can manage a turnaround, have great news, get back on track, and it would take care of itself because traders would chase the penny stock up the whole ride.  Secondly, it can raise cash and make the gamble that investors willingly accept the dilution as the cost of doing business to get its balance sheet in order.  Then there is the great trick used by companies in trouble with low share prices…. a reverse stock split.

Unfortunately, Ambac was listed as one of our top 10 brands which could disappear in 2010.  After all, its CFO left after missing an SEC filing deadline, and the company already disclosed that it may be forced to file for bankruptcy protection if it was unable to improve its capital position.  This has ‘going concern’ written all over it.

We would hope that it could get a capital raise.  If that occurs, then Ambac will have saved itself at least in part of its operations.  If that does not occur, then Ambac will likely have to consider a reverse stock split.

The clock is ticking….

JON C. OGG