Is RadioShack About to Be Delisted?

The consumer electronics retailer is treading water and doesn't have much time to maneuver.

Jul 16, 2014 at 10:05AM

Images

The last time RadioShack (NYSE:RSHCQ) traded above $1 per share was on June 19, when it closed out at $1.03 per share. Since then it's broken that barrier a handful of times during the day, but by the time the markets have closed, its shares have fallen back below the $1 threshold.

That's significant because the New York Stock Exchange rules require that stocks listing with the exchange exceed the $1 level by the end of the day at least once in any consecutive 30-day trading period. On that basis, RadioShack has until Aug. 1 to close above the threshold or receive a delisting notice from the exchange. At that point it has a 10-day window to explain how it will raise the stock price, otherwise it can voluntarily choose to delist and instead trade on the penny-stock pink sheets.

While the NYSE can forcibly remove the stock at that point, many similarly situated companies that want to remain publicly traded opt for a reverse stock split, a maneuver that vastly reduces the number of shares outstanding and artificially raises the stock's price. Just as when a company announces it is splitting its stock, say, 2-for-1, and you end up with twice as many shares in your account than you had before, but now they're at half the price, a company announcing a 1-for-5 reverse split, for example, will reduce your 100 shares to just 20 while increasing their value fivefold.

It's one reason The Motley Fool has regularly urged investors to ignore when companies announce splits, because it's really little more than financial sleight of hand. Sure, the markets tend to view forward splits as a bullish signal, but it's really background noise to how a company is operating. Reverse splits, on the other hand, are something investors should be mindful of because, as in RadioShack's case, their deployment is usually undertaken by companies in serious financial trouble. Not always, mind you, but often enough that it should be at least a yellow flag if a company you own announces one.

The clock is ticking on RadioShack. The consumer electronics retailer is under pressure to turn its business around and has adopted a number of strategies lately that could change the dynamic of its operations, but only if it doesn't run out of time -- or money. It may end up being a case of too little, too late.

Like rival Best Buy, which was also nearly brought to the brink of financial ruin, RadioShack met the challenge faced by the changing retail landscape by betting big on smartphone technology to save it. Best Buy chose to open dedicated mobile stores that housed nothing but cellphones while The Shack opted for being virtually all cellphone, all the time. Phones still dominate a prominent position in its marketing -- one of its newest initiatives is to make RadioShack stores the go-to place for repairs -- but it's also embracing new ideas, including a new deal with PCH International to introduce new inventions to customers through a national marketing campaign.

The problem is it may have waited too long to pivot. Revenues continue to fall and losses are widening. It's constrained by its lending agreements in just how much cost-cutting it can do (the agreements limit the number of stores it can close, for example), it's quickly burning through cash, and bankruptcy remains a real possibility, let alone a delisting.

I remain hopeful RadioShack can survive. Management seems to have seen the light at last, and it's at least making the right noises about what it wants to achieve. However, I wouldn't invest in its stock. The situation is too dire, the risks too great, to take a gamble it will pull through. Far larger, more storied (though not necessarily better-run) companies have succumbed over the years, and the market does not suffer nostalgia. 

RadioShack has a small window of opportunity in which to act, but whether its shares remain listed or not could be the smallest of its concerns.

Bigger than the iPhone? Apple's next smart device
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Rich Duprey has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers