The Manhattan-based stock exchange's dreaded "E" - indicating companies delinquent in their mandatory Securities and Exchange Commission filings - was due to be added to the Lindon software firm's SCOX symbol, SCO officials acknowledged Thursday.
The company's confirmation that it faces possible delisting for failure to meet Jan. 31 and Feb. 15 deadlines for the 10-K report triggered a sharp dip for SCO stock, already down about 75 percent over the past year. SCO slid as low as $3.79 per share Thursday, down 10 percent, before closing at $4.08, down 22 cents, or 5 percent, from Wednesday's trading.
SCO, known for its $5 billion lawsuit against IBM for allegedly using SCO's Unix code in Linux-related applications, was supposed to have filed its year-end results by Jan. 31. Instead, the company filed a notice of late filing on that date, then missed a Tuesday deadline provided by the extension.
If delisted, SCO probably would follow other Utah companies kicked off the Nasdaq - like Fonix, Tenfold and ClearOne - in downgrading their listing to a smaller, less prestigious exchange like the Over the Counter Bulletin Board system.
In a brief statement Thursday, SCO acknowledged Nasdaq had begun delisting procedures, although "receipt of the notice does not result in immediate delisting of the company's common stock.
"Nasdaq stated that unless the company requests a hearing . . . [SCO] will be delisted from the Nasdaq SmallCap Market at the opening of business on Feb. 25," the company said.
SCO concluded by saying delays in its 10-K filing were the result of continued scrutiny of "certain matters related to the issuance of . . . common stock pursuant to its equity compensation plans."
Nasdaq has given SCO until Feb. 25 to request the hearing. SCO indicated that if it is unable to file its belated 10-K by then, it will appeal.
"It's obviously in our company's best interest to file our Form 10-K as soon as possible and avoid delisting and I'm confident that we will do that in short order," SCO spokesman Blake Stowell said.
Citing exchange policy, Nasdaq spokesman Wayne Lee declined to comment. However, analysts and at least one SCO shareholder were keen to find what tales the company's 10-K may tell when finally released.
"If they clean up the problem in the next few days, then I don't believe it is a big deal," said Dion Cornett of Decatur Jones. "If they don't, then they should face some tough questions about why they didn't work around the clock to fix a relatively minor issue.
This "says a lot to investors about lack of capabilities, controls and process," he added.
Requests for shareholder comment, including from major investors such as BayStar Capital (1.47 million shares) and Royce & Associates (613,000 shares), went largely unanswered Thursday.
However, Al Petrofsky, a Menlo Park, Calif., investor with a net short position of 14,300 SCO shares as of last month, predicted SCO would eventually dodge delisting.
"I expect the NASDAQ hearing process will last at least a few months, and I think it's more likely than not that SCO will eventually complete the 10-K, one way or another," he said. "I certainly am eager to learn more about what the problem is, and what, if anything, it has to do with the Canopy crisis."
Petrofsky referred to the December coup - and subsequent dueling lawsuits - involving the ouster of longtime chief executive Ralph Yarro and fellow executives by The Canopy Group, SCO's parent company.
bmims@sltrib.com
