Rite Aid faces a potential delisting for not meeting NYSE's minimum market capitalization and share price requirements. / Photo: Shutterstock

Amid buzz of an upcoming Chapter 11 bankruptcy filing, Rite Aid has been warned by the New York Stock Exchange (NYSE) that it faces a potential delisting for failing to meet minimum market capitalization and share price requirements.

Philadelphia-based Rite Aid said late Wednesday that it received written notice of noncompliance with the two standards from NYSE on Sept. 28. To remain listed on the exchange, a company’s average total market capitalization must be at least $50 million and its shareholder equity at least $50 million over 30 consecutive trading days. Also, the average closing price of a company’s common stock must be at least $1 per share over the 30-day period.

In an 8-K filing with the Securities and Exchange Commission on Wednesday, Rite Aid reported a $49.97 million average market cap and an average share closing price of 88 cents for the 30 trading days through Sept. 27. The drug chain also said in the filing that it had a shareholder deficit of $947 million in its last reported stockholder equity figure on June 3.

Under the exchange’s rules, Rite Aid has 10 business days from its receipt of the warning to notify NYSE in writing that it has received the noncompliance notice and report if intends to cure the deficiencies.

To rectify the situation, Rite Aid has 45 days to submit an action plan to bring the company into compliance with the market-cap floor within 18 months. The pharmacy retailer also can regain minimum share price compliance within a six-month period after receipt of the NYSE notice if, on the last trading day of any calendar month during the cure period, the company has a closing share price of at least $1 and an average closing share price of at least $1 over the 30 trading-day period.

Rite Aid noted in the filing that its common shares will continue to be listed and traded on NYSE during the cure periods. If NYSE doesn’t accept the market-cap cure plan or the company doesn’t attain a minimum $1 share price over the required period, the exchange will begin procedures to suspend Rite Aid’s shares from trading and delist them.

“As previously disclosed, the company has been engaged in reviewing and continues to review strategic alternatives to recapitalize, refinance or otherwise optimize its capital structure, which may ultimately result in the company pursuing one or more significant corporate transactions or other remedial measures,” Rite Aid stated in announcing the NYSE notice after Wednesday’s market close. “The ongoing review includes an evaluation of available options to regain compliance with the NYSE’s continued listing standards. The company can provide no assurances that it will be able to regain compliance with the NYSE’s continued listing standards or otherwise and maintain the listing of its shares on the NYSE or the results of the ongoing review.”

As of afternoon trading on Thursday, Rite Aid’s share price stood at 54 cents, with a range of 49 cents to 55 cents. The company’s common stock opened the day at 50 cents after closing at 53 cents on Wednesday.

Pharmacy retailer under financial stress

News that Rite Aid was preparing to file for Chapter 11 bankruptcy protection has emerged over the past couple of months as the company faces the financial fallout from a deluge of opioid-related litigation. The Wall Street Journal reported in late September that Rite Aid was readying a Chapter 11 plan that included the closing of 400 to 500 of its more than 2,200 stores in 17 states and divesting its remaining locations and operations or turning them over to creditors. Auctions also are planned for Rite Aid’s Elixir pharmacy services unit and other assets, the Journal said.

Rite Aid declined to comment on reports of an imminent Chapter 11 filing but said the company is working to shore up its finances.

“Rite Aid is continuing to work collaboratively and constructively with our financial stakeholders to identify the best path forward to reduce our debt and position the business for continued success,” a Rite Aid spokesperson said in an email statement at the time. “Given the conversations remain ongoing, no decisions have been made at this time, and we are focused on reaching an agreement with our financial stakeholders that will make Rite Aid stronger.”

About a month earlier, the Journal reported that Rite Aid was nearing a Chapter 11 filing to halt over 1,000 federal and state lawsuits claiming the company helped fuel the nation’s opioid overdose epidemic by oversupplying controlled-substance prescription painkillers. The pharmacy retailer and health care services company also has been weighed down by a $3.3 billion debt load, a lackluster quarterly performance, and other market and economic factors.