Beazer could face stock delisting warning

The stock price of Beazer Homes USA has fallen off the cliff.

Since Feb. 12, shares of the Atlanta-based home builder have been trading below $1. The $79 a share Beazer commanded in January 2006 seems like ancient history.

If Beazer fails to return to $1 soon, the New York Stock Exchange may issue a delisting warning. The warning would give the embattled company six months to rise to $1 and stay there for at least 30 days. Beazer could be granted an additional six months if it pursues “curative actions” requiring shareholder approval.

Beazer has been traded on the NYSE since 1994.

“The company values its NYSE listing and should we receive a notice that we are out of compliance with the criteria for continued listing, we intend to take appropriate actions to cure non-compliance within the prescribed timeframe for the benefit of our shareholders, although there can be no assurance that we would be able to do so,” Beazer vice president Leslie Kratcoski said in a statement.

Beazer’s share price closed Tuesday at 64 cents.

In its last quarterly report, released this month, Beazer said it lost $80.1 million in the first quarter of its fiscal year compared to the same period in 2007, and revenues were down 53.6 percent. Sales closings fell 53.2 percent and new orders were off 56.5 percent from the previous first quarter.

All home builders are taking a beating in the housing downturn, but Beazer also faces legal problems. Federal investigators and state investigators in North Carolina are looking into Beazer and its former lending arm, Beazer Mortgage. The company has admitted its employees violated down-payment-assistance regulations.

If it’s delisted from the NYSE, Beazer could be required to repay bond holders millions of dollars “unless we are able to list our common stock on another exchange or have it quoted on an established over the counter trading market.”

“In order to fund any required repurchases, we might be required to seek additional financing for such amounts,” the company states in an SEC filing. “We can give no assurance that we would be able to obtain such financing, on favorable terms, or at all.”

The NYSE might relax its listing rules because so many companies are struggling. But whether that would help Beazer is unknown. The NYSE can drop a weak company at any time.

Analysts said Beazer’s shrinking share price by itself does not portend doom, but other issues might.

“The only significance I see is the capitulation of the stockholders, realizing they’re standing on quicksand,” said Vicki Bryan, analyst with Gimme Credit.

Of more significance, Bryan said, is Beazer’s declining net worth. If it falls below $100 million, loan agreements could be terminated. Beazer said its net worth as of Dec. 31 was $255 million.

Bryan said “any market value attributed to their stock is being optimistic” because Beazer’s situation is dire.

Another analyst, Daniello Natoli, managing director at Matrix USA LLC in New York, said “the bigger issue in this case is the amount of debt the firm has. The investor is not getting a positive economic return.”

Natoli said Beazer’s leverage ratio — its liabilities divided by its equity — is much higher than the norm. So Matrix USA rates Beazer a “strong sell.”

“This firm is one of the weakest in the [housing] group,” he said.

Other analysts are not so pessimistic.

James Wilson, director of research at JMP Securities in San Francisco, rates Beazer a “market perform.”

“There are other builders who’ve moved below $1,” Wilson said. “Financially, it doesn’t make any difference how or where your stock trades, as along as fundamentals are OK. The stock isn’t the company.”