Does Pacific Ethanol Deserve Listing Requirement Extensions? (PEIX)

Pacific Ethanol, Inc. (NASDAQ: PEIX) is trading higher this morning on reports that NASDAQ sent it a letter dated December 28, 2010 notifying the company that it has met all of the requirements to be granted an additional 180 days to regain compliance with the minimum $1.00 bid price per share requirement for continued listing on The Nasdaq Capital Market.  The extension gives the company until June 27, 2011 to rectify the $1.00 share price issue.  Does Pacific Ethanol deserve to be cut any slack?  The question may seem rhetorical, but it is a fair one now that most companies that have deserved to get back to listing standards have done so without as much intervention.

Pacific Ethanol may achieve compliance during the extended period if the closing bid price of its common stock is at least $1.00 per share for a minimum of 10 consecutive business days before June 27, 2011. If the company does not regain compliance during the second compliance period, Nasdaq will provide written notice that the company’s common stock will be delisted from The Nasdaq Capital Market. If that occurs, then Pacific Ethanol may attempt to appeal the determination to a hearings panel.

Back in 2008 and 2009 it was very common to give penny stocks a break on the $1.00 rule.  After all, so many stock fell under that threshold as investors ran for the exits bracing for the end of the world.  To add the conflict of interest angle, NASDAQ would have been shooting itself in the foot financially had it thrown so many companies off the exchange because it would have lost so much in listing fees and because its total daily share volume would have been significantly cut.

NASDAQ listing extensions do matter.  Pacific Ethanol is actively traded and it also is one of the few remaining pure-play ethanol stocks.  Traders and investors are glad that Pacific Ethanol gets an extension here.  Purists would argue that it is a false reality by bending the rules.  Shares are up 3.1% at $0.76 in the pre-market trading.  The market cap as of yesterday’s close was roughly $66 million and the average daily volume is over 2 million shares.

JON C. OGG