Several industry analysts have predicted that a thinning of the herd is imminent within the oversaturated online insurance marketplace segment. If stock performance is a key indicator of a company's strength, this shakeout may be ready to commence.Two online marketplace providers in January faced the indignity of being delisted from the Nasdaq stock exchange for failing to maintain a minimum bid price of $1 for 30 consecutive days. Darien, Ill.-based Quotesmith.com Inc. and Atlanta-based Ebix.com were swept up in the Nasdaq delistment wave that has swelled to more than 200 since November.
If a company's stock trades below $1 for 30 days, Nasdaq sends a letter to the company, triggering the delisting process. A company then has 90 days to bring its stock price back up above $1, where it must remain for 10 consecutive days. If the price remains below $1 after 90 days, the listed company has seven days to request a hearing seeking an exception.
In an effort to revive it stock, Quotesmith's immediate response to the National Association of Securities Dealers' action was to execute a one-for-six reverse stock split. It also repurchased 3.5 million shares of its stock in late 2000, representing 18% of the 19.2 million shares outstanding.
If Quotesmith.com were delisted, the company would have several options, says William Thoms, executive vice president and COO of Quotesmith.com. Two possible options are to become privately held or to seek potential buyers.
For now, though, Quotesmith.com is proceeding "business as usual," Thoms adds.
In discussing the company's financial difficulties, Thoms passes it off as guilt by association. "Ninety-eight percent of tech stocks have done the same thing ours has," says Thoms. "It's the 'Pied piper effect.'"
One industry analyst, however, claims that Quotesmith.com's predicament is self-inflicted.
"Quotesmith spent far too much on branded advertising ($24 million in 2000)," says Todd Eyler, senior analyst with Cambridge, Mass.-based Forrester Research Inc. "They should be addressing their marketing spending in more cost-effective ways, such as expanding its exposure through distribution partnerships with other Internet sites."
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