Durham tech company at risk of bankruptcy, delisting from New York Stock Exchange
On Sept. 28, 2020, the CEO of telecommunications firm Avaya rang the opening bell on the New York Stock Exchange to mark the company’s 20th anniversary. That morning, a share of Avaya stock was selling for close to $17; within months, its price would rise above $30.
But after a rocky two years, the Durham-based company is now in danger of being kicked off the world’s largest stock exchange.
On Dec. 29, the NYSE notified Avaya it was not meeting the exchange’s standard that member companies must maintain an average closing price of at least $1 over a 30-day trading period. As of midday Wednesday, Avaya’s share price was 19 cents.
Avaya responded to regulators that it intends “to cure the stock price deficiency” to meet NYSE compliance. It will now have six months to do so or face delisting.
Major exchanges like NYSE and Nasdaq generally offer companies exposure to greater trading volume and investor interest. If removed from these places, companies may continue operating publicly on less prestigious broker-dealer exchanges like OTC, or “over the counter,” markets.
“They’re not followed as frequently,” said Amy Batten a securities and mergers & acquisitions attorney with Smith Anderson in Raleigh. “Perhaps you don’t have as much analyst coverage as you might get if you’re traded on one of the bigger exchanges.”
Batten explained two ways companies can generally raise their stock prices.
One is what she called the “natural course of events”: good earnings reports, promising macroeconomic trends, favorable technological advances. But if the market doesn’t elevate a stock price on its own, a company can boost its cost per share through maneuvers like reverse stock splits, which consolidate existing shares into fewer, higher priced shares.
“That usually requires going to shareholders, which can be kind of tricky,” Batten said “Sometimes they don’t want to approve that, sometimes they do.”
Avaya declined to share how it plans to elevate its stock. The company also would not comment on its Dec. 13 filing with the U.S. Securities and Exchange Commission (SEC) in which Avaya said it was exploring multiple restructuring options to address debt obligations, including filing for Chapter 11 bankruptcy.
Of the many consequences of bankruptcy fillings, companies entering bankruptcy are at risk of being taken off major exchanges.
A 2022 to forget
NYSE compliance is just the latest hurdle for the firm, which relocated from California to the Triangle right around the time it rang the opening bell in 2020.
In recent years, the company has shifted toward offering clients cloud-based communication services through subscriptions, but the transition hasn’t been smooth.
Last year, Avaya twice missed revenue targets and saw a major debt deal with Goldman Sachs and JPMorgan Chase fall through. It replaced its CEO in August, the same month the company told the SEC it would delay filing its 10-Q financial report for the third quarter, a decision that shot the company’s already floundering stock price lower.
In September, Avaya announced an unspecified number of layoffs, including some at its headquarters near Research Triangle Park. As of late 2021, the company had around 8,000 employees worldwide, a workforce tally that’s almost certainly since diminished.
This story was produced with financial support from a coalition of partners led by Innovate Raleigh as part of an independent journalism fellowship program. The N&O maintains full editorial control of the work.
