Hovnanian struggles with low market cap, potential delisting

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Hovnanian Enterprises, the corporate parent of homebuilder K Hovnanian Homes, received a new notice from the New York Stock Exchange indicating its low market capitalization could jeopardize its listing status.

Hovnanian's market cap failed to meet NYSE standards because it was less than $50 million over a 30-day period. Market capitalization is determined by multiplying a company's shares outstanding by the price of a single share.

"The notice does not affect the ongoing business operations of Hovnanian," according to a company press release issued Wednesday.

The builder will respond by submitting to the NYSE a written plan detailing actions it has taken, or will take, to restore its market cap to levels that would bring it back in compliance with listing standards.

The NYSE will review the plan and judge whether the company has made a "reasonable demonstration" that its plan will bring the company back into compliance with listing standards within 18 months.

"If the NYSE accepts the plan, Hovnanian's Class-A common stock will continue to be listed and traded on the NYSE during the 18-month cure period, subject to the company's compliance with other continued listing standards," the company said in its release.

The stock exchange also will monitor the company's compliance with the plan on a quarterly basis.

Hovnanian in late March completed a 1-for-25 reverse stock split to improve the trading price of its shares after receiving a NYSE listing notice in January indicating the price of its Class-A shares had failed to meet minimum average closing price criteria.

The value of the company's stock on Monday was up 12% from where it had been roughly a month earlier, according to a Zacks Equity Research report issued that day. But the opening price of its Class-A shares was more than 8% lower on Thursday at $8.53.

Prospects for the company's earnings have been more favorable this year due to lower mortgage rates, which have improved the outlook for its home sales.

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