Investment Opinion
FOOL PLATE SPECIAL

Nasdaq Requirements & Delisting

SYQUEST TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: SYQT)") else Response.Write("(NASDAQ: SYQT)") end if %> got smashed for $4 3/4 to $8 7/8 yesterday after an individual investor short the shares apparently communicated to the media that SyQuest was in violation of requirements for continued listing on the Nasdaq National Market. Shares recovered $5/8 to $9 1/2 this morning, however, as other investors realized that simply being in violation of listing criteria is only the first step in a very long road of delisting. There are two separate issues here: the requirements for continued listing and the implications of an individual investor feeding the news media the story. We will quickly cover one at a time.

FIRST, SYQUEST SHAREHOLDERS HAVE NO REASON to fear immediate delisting. Despite the fact that the company is in violation, delisting is a long and arduous process filled with many waivers and exemptions for special circumstances. Unless outright fraud is involved, if a company can present a credible plan to meet the requirements again, the Nasdaq will let them go. Anyone who sold yesterday simply because of delisting fears was over-reacting. Below is a list of the requirements.

SUMMARY OF FINANCIAL REQUIREMENTS FOR CONTINUED LISTING:

* Registration under Section 12(g) of the Securities Exchange Act

* Public Float (Shares) -- 200,000

* Market Value of Public Float -- $1 million

* Net Tangible Assets -- $1 million in most cases, but $2 million if the issuer has sustained losses from continuing operations and/or net losses in two of its last three fiscal years, or $4 million if the issuer sustained losses from continuing operations and/or net losses in three of its four most recent years.

* Minimum Bid Price -- $1.00

* Number of Market Makers -- 2

NOW, IF THE FACT THAT SYQUEST IS IN VIOLATION drives home the simple point that the company is in trouble, then any selling was justified. Although many have been recently excited about the prospects for the EZFlyer, this is still a company that is in some trouble. PROS: New management, new product, new marketing direction. CONS: Negative working capital, a portion of accounts payable set to convert into equity, very little cash in the till and a recent loss of 60% of its work force, among others. Investors should also realize that the parallel port EZFlyer will not be any faster than the parallel port Zip drive as the parallel port is a bottleneck. "It's like putting a Ferrari engine on a rickshaw that won't go any faster than 5 mph," quipped Fool Charles Park (MF Chiros).

NOW, WHAT DOES IT MEAN THAT AN INDIVIDUAL INVESTOR is the one that feed this story to the media? Not much, actually, in my opinion. First, professional short sellers have been feeding negative stories to the media for years. It is the responsibility of the media organization in question to verify the information independently and figure out if they are being used or not. If I can convince some Reuter's wire reporter to run a story based on facts that supports my position, so be it. If the Reuter's reporter covering equity markets lacks the depth of experience and information to know, for instance, that delisting is hardly fait accompli, then Reuter's needs to rethink who they have covering these stories. As for Bloomberg and CNBC picking up the story from Reuter's, these organizations as well bear the brunt of the responsibility of independently verifying their sources. In the end, the investor bears the ultimate responsibility of viewing very skeptically and verifying independently any news from any media organization.

UPS

Morgan Stanley added LA QUINTA INNS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: LQI)") else Response.Write("(NYSE: LQI)") end if %> to its "Fresh Money Buy List" this morning, upgrading it from "outperform." The "Fresh Money Buy List" is a list of ten stocks favored by Morgan Stanley gooroo Byron Wein. The stock rose $2 to $32 7/8.

PINNACLE SYSTEMS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PCLE)") else Response.Write("(NASDAQ: PCLE)") end if %> recovered some lost ground this morning, rising $1 to $18 3/4 after getting whacked for more than 30% when it reported yesterday that it would not make fourth quarter earnings estimates of $0.25 EPS.

OPTICAL CABLE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: OCCF)") else Response.Write("(NASDAQ: OCCF)") end if %> announced a two-for-one stock split this morning, boosting shares of the fiber-optic cable technology concern $3 1/2 to $45 1/2. Hopefully this split will help calm volatility by boosting the extremely tiny float the company boasts.

TELEDATA COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: TLDCF)") else Response.Write("(NASDAQ: TLDCF)") end if %> soared $13/16 to $14 15/16 this morning, apparently on news that it had received $5 million in orders for its TIMUX line multiplexer, a product which allows operators to immediately increase the capacity of existing networks.

Bear Stearns analyst Kamal Hamid initiated coverage today of eleven health care companies, giving AMERICA SERVICE GROUP <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ASGR)") else Response.Write("(NASDAQ: ASGR)") end if %> an "attractive" rating, which sent it up $1 1/4 to $20 1/4 this morning.

A $10.5 million contract for a year 2000 solution boosted VIASOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: VIAS)") else Response.Write("(NASDAQ: VIAS)") end if %> $3 3/4 to $59 1/4 today, or $32.4 million in market capitalization. Could there be a disconnect between the actual news and the stock's reaction? Maybe.

U.S. OFFICE SUPPLY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: OFIS)") else Response.Write("(NASDAQ: OFIS)") end if %> continues to use the substantial cash hoard generated from its initial public offering to buy regional, office supply companies. A whopping 48 acquisitions, some announced today, will close in July, raising the stock $1 23/64 to $41 47/64.

Shareholders of YAHOO! <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: YHOO)") else Response.Write("(NASDAQ: YHOO)") end if %> caught a break today, with the stock up $7/8 to $28 after Yahoo! signed a letter of intent to provide DIGITAL EQUIPMENT'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DEC)") else Response.Write("(NYSE: DEC)") end if %> AltaVista search service to Yahoo! subscribers for an undisclosed price.

BALLY'S ENTERTAINMENT <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BLY)") else Response.Write("(NYSE: BLY)") end if %> is up $1 to $27 1/8 after a Wall Street Journal's "Heard on the Street" columnist reported that HILTON HOTELS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HLT)") else Response.Write("(NYSE: HLT)") end if %> is prepared to buy Bally for a cool $2 billion.

DOWNS

After Carlton Lutts of the Cabot Market Newsletter made comments yesterday that the Securities Exchange Commission (SEC) had contacted him in March asking for all materials on PRESSTEK <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: PRST)") else Response.Write("(NASDAQ: PRST)") end if %> since late 1994, Cabot Stocks have not been the same since. A sampling of recent Cabot Recommendations that are down today.

* PRESSTEK slumped $34 1/8 to $74 7/8 this morning

* DIANA CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: DNA)") else Response.Write("(NYSE: DNA)") end if %> was down $6 3/8 to $81 1/2

* ZOLTEK CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: ZOLT)") else Response.Write("(NASDAQ: ZOLT)") end if %> lost $14 63/64 to $67 1/2

* MRV COMMUNICATIONS <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MRVC)") else Response.Write("(NASDAQ: MRVC)") end if %> fell $8 3/4 to $57

* JLG INDUSTRIES <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: JLGI)") else Response.Write("(NASDAQ: JLGI)") end if %> shed $9 3/4 to $71 1/4

* IOMEGA <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: IOMG)") else Response.Write("(NASDAQ: IOMG)") end if %> was off $3 1/8 to $36 5/8

* AMERICA ONLINE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: AMER)") else Response.Write("(NASDAQ: AMER)") end if %> crashed another $3 3/8 to $44 1/4

MICRO WAREHOUSE <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MWHS)") else Response.Write("(NASDAQ: MWHS)") end if %> imploded $9 1/8 to $25 5/8 this morning after yesterday's announcement that it saw second quarter and annual income coming in below analyst's estimates. Alex Brown analyst Marcia Aaron cut the stock from "strong buy" to "sell" on the news.

GANDALF TECHNOLOGY <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GANDF)") else Response.Write("(NASDAQ: GANDF)") end if %> continues to crater on no news, off another $1 7/8 to $10 3/8 today. Perhaps dimming prospects for wide-market acceptance of ISDN play into this? Check out the Fool folder for details.

CYTEL CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: CYTL)") else Response.Write("(NASDAQ: CYTL)") end if %> lost $3 1/8 to $5 3/8 after ending Phase II trials of its cell adhesion blockers upon the recommendation of the independent safety and data monitoring panel looking over the tests. Not a good sign.

KEMET CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: KMET)") else Response.Write("(NASDAQ: KMET)") end if %> got mashed by the scissors today, falling $3 1/16 to $19 5/8 as Interstate Johnson and Robinson-Humphrey slashed their ratings to the equivalent of "neutral."

GYMBOREE CORP. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: GYMB)") else Response.Write("(NASDAQ: GYMB)") end if %> was singing the same-store sales blues today, falling $1 3/4 to $33 5/8 after it announced sales off 6% this morning. After the beating BABY SUPERSTORE'S <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: BSST)") else Response.Write("(NASDAQ: BSST)") end if %> took for similar problem, perhaps we should conclude that kid's clothing items are not exactly hot these days?

Randy Befumo (MF Templar), a Fool
Selena Maranjian (MF Selena), another Fool

Transmitted: 06/05/96