The action has been taken because Chesapeake’s average market capitalisation was less than $25m over a 30-day trading period. Shares will now be traded on the over-the-counter bulletin board.
Chesapeake has posted net losses for the past three financial years, with the company recording a net loss of $261m in the second quarter of 2008. In comparison, the company made a net loss of $11.5m over the comparable period last year.
This has contributed to the company’s share value dropping significantly, falling from $18 in February 2007 to $0.15 when the NYSE stopped trading Chesapeake stock.
Part of the company’s difficulties stem from its debt, which the second quarter report listed as $574m. Chesapeake had been hopeful of restructuring its repayment but this has proved challenging in the tumultuous financial waters.
Alongside the release of the quarter two results in August was news of a refinancing deal, which would “address the company's short- and long-term capital needs”.
This was predicted to be finalised in September but discussions are still ongoing, with Chesapeake releasing an update shortly before the news that the NYSE was suspending trading.
An ad hoc committee has now been formed by some of the lenders who have been in discussions with the company over how the should proceed. Options include undertaking transactions to cut debt but this would leave its common stock with nominal or no value.
The company has also been trying to sell its non-core assets but CEO Andrew Kohut raised concerns that it may not be possible to get a reasonable value for the sales given the current credit market.
Pharmaceutical packaging will probably survive such measures as it is better equipped to survive an economic downturn than the branded product business, which is affected more by consumer spending.
Big trouble in little pharma
Chesapeake has not been the only company lined to the pharmaceutical industry that has struggled with the changing economic landscape.
In what may be a portent of things to come five pharmaceutical companies have received notices from the Nasdaq Stock Market stating that they were not in compliance with aspects of its regulations.
Oscient Pharmaceuticals has been issued a notice because the market value of its publicly held shares was below the $15m threshold for 30 consecutive business days.
deCODE genetics and Pharmacopeia both received notices because the market value of their common stock was less than $50m for 10 successive trading days.
Meanwhile, Nasdaq deficiency notices were also received by Nucryst Pharmaceuticals and Monogram Biosciences because their share price remained below $1 for 30 consecutive business days.
The companies now have a period during which they can regain compliance with Nasdaq requirements.