Light Rail Vehicles - LRT, ICTS, Monorail, and more

[ookpik]

On some markets, a company gets delisted when your stock becomes a "penny stock," and it can be a vicious cycle since index and mutual funds divest themselves of its stock (since it's no longer listed on an exchange they track). That's not the case with the TSX, so the fact that Bombardier happens to be trading at less than a dollar is really just a headline.

One notable market where this is the case is NYSE. BBD doesn't trade there because of its multi-voting class shares. (The class B shares trade over the counter.)

But even if there's no risk of delisting there's still a large stigma attached to being a "penny stock."(*) Managers of blue chip mutual funds don't want to be seen owning such "junk." That's why some companies in this situation will do a reverse-split, consolidating 10 shares into 1. A good example of that was Nortel, who was forced to do it in order to stay on the NYSE. But as we know that didn't work out so well for them.

(*) The converse is to let the stock price grow to a very large number, e.g. Google, Apple, and especially Berkshire Hathaway. It's thought that this lends an air of exclusivity and prestige to the stock because only wealthy (read: "sophisticated") investors can afford to own it in any quantity.