I've been talking about the possibility of THQ getting delisted from the NASDAQ for a few weeks, and now the first step has been taken. It shouldn't come as a surprise, as THQ stock has been under $1 since early December. The warning doesn't mean that THQ is certain to be delisted, as the publisher has until July 23rd to show a 10-day stretch of values peaking over $1 per share; however, it's a surefire sign of trouble just ahead of THQ's upcoming Q3 earnings call.
The warning signs have been there as stock values have declined steadily since late December of 2007. On December 21, 2007, THQ stock closed at $29.63 per share. It's now valued at $0.68 per share as of this writing, or a 98% decline. Looking at the publisher's stock chart, it's easy to see the sharp devaluation in 2008 and generally flat years in 2009 and 2010 before the bottom began to fall out in July of last year. That's when I first started discussing possibilities of a buyout or closure. A delisting possibility became more apparent in October and November as values dropped to near $1.50 at times.
Some observers are dismissing the delisting warning, citing examples like Majesco and Atari as managing to stick around despite the challenges that come with such a state. It's true that delisting has been overcome in the past. Majesco managed to overcome delisting twice. Atari was also delisted. It's also important to note that this is merely a warning at this point. It's not out of the question that stock values may rise due a number a factors, such as strong sales, executive changes, or a surprisingly positive Q3 earnings call.
The only thing that's changed from 24 hours ago is that THQ is now on the clock to avoid having its stock delisted. Perhaps a reverse split will do the trick if things don't turn around. Maybe THQ can win an appeal from NASDAQ for an extension if sales and earnings start to turn the corner. Perhaps a potential buyer will emerge and prices will react favorably. There are options and possibilities, as long as THQ's debt doesn't catch up with it.
All eyes and ears will be on the THQ earnings call this week, followed by investor response to it. Calls for the resignation or removal of CEO Brian Farrell will likely go unanswered, but if earnings beat estimates and show some improvement down the road, it may be enough to weather THQ out of the woods and towards a recovery period. If the earnings call doesn't go that well, however, it will be interesting to see just how low THQ stock may fall.
That THQ is facing delisting is likely the work of traders, not investors. Shorts have chomped at every piece of bad news they could get and, indeed, there has been a lot of it this year.
ReplyDeleteAt this point, though, the stock has found, or is very close to, a bottom. Watch for a surge in the very near future - likely when shorts have to cover when THQ beats earnings that it overslashed intentionally.
Partly real trouble, partly Wall St games.
We shall see.