An Ill-Suited Move

When listing on the NYSE became too rich for Syms's blood, it turned to the Pink Sheets instead. Investors were outraged. Next stop: Nasdaq.

While many small companies dream of listing on the New York Stock Exchange, off-price retailer Syms Corp. recently decided that living that dream was just too expensive. A small chain with only 33 stores, low trading volume, and no analyst coverage, Syms told investors in January that it would voluntarily delist from the NYSE, deregister with the SEC, and trade on the Pink Sheets. “Our intention is to reduce costs…imposed by what we consider to be onerous provisions of the Sarbanes-Oxley Act of 2002,” wrote chief executive Marcy Syms in a letter to shareholders. The company estimated the move would save $750,000.

Rather than applaud, however, investors rebelled. Led by two hedge funds that together hold nearly 10 percent of Syms’s outstanding stock, shareholders argued that by trading on the lightly regulated Pink Sheets, the company would limit access to information. Facing a lawsuit, Syms notified investors in February that it would move to relist itself, this time on Nasdaq, where fees are lower than on the NYSE.

The company’s initial delisting was curious, says David Calusdian, a partner at investor-relations firm Sharon Merrill. “It’s hard for small-cap companies to get visibility as it is,” he says. “Moving away from the credibility of a national exchange makes it infinitely more so.” Because many institutional investors are not allowed to take positions in Pink Sheets companies, he adds, “listing on them can be like going into a black hole. The benefits to being on a national exchange far outweigh Sarbox costs.” Some observers speculated that the delisting may have been intended to simplify a going-private strategy. Syms had no comment.

Ticker Shock

A timeline for Syms’s delist/relist saga

12/21/07: Syms announces plan to delist from NYSE (stock trading at approx. $17) and trade on Pink Sheets, citing cost of Sarbox as rationale.

1/14/08: Begins trading on Pink Sheets; stock at approx. $11

1/28/08: Letter to shareholders describes transition as “seamless,” criticizes Barington Capital as “disgruntled shareholder.”

2/12/08: Announces plan to reregister common stock with SEC and trade on Nasdaq, citing cost of potential litigation as rationale.

2/28/08: Begins trading on Nasdaq under “SYMS”; stock approx. $14

Source: Syms Corp.

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