Jim Verdonik, founder of Innovate Capital Law, says these notices tend to work against companies, because it comes across as bad news to investors. “When a company announces it might have its trading market lowered, then it’s harder for the company to convince the marketplace it won’t happen,” he said. “It’s kind of hard to raise your market capitalization on your own unless you have good news sitting there that the market is waiting for.”
Should the company fail to meet the threshold, Verdonik said most companies choose to trade on the Capital Market but face several negative ramifications for doing so.
He said many investors – especially institutional investors – use the market and corresponding thresholds to evaluate whether they want to invest in a company and evaluate their risk for doing so.