I RECALL that in the past whenever a US stock broke below US$1, the New York Stock Exchange had a rule that the company concerned had to do everything it could to push its share price above this level, or suffer the pain of delisting.
I do not know if the rule has been repealed, but it is a sensible circuit breaker. Trip it and the alarm goes off, alerting investors that serious problems are besetting the stock.
On Thursday night, embattled banking giant Citigroup broke US$1 for the first time in its history, even though it managed to close two US cents above this landmark threshold level at the close.
It had come a long way down, since touching a historic high of US$57 on December 6 – which is less than three years ago.
Ask someone then whether Citi could have fallen below US$1 and you would have been greeted with a look of incredulity. At that point in time, this would have been the stuff of horror fiction.
So what is the market telling us by turning it into a penny stock?
One thing for sure: Investors are questioning its ability to survive financially and are bailing out in droves.
There is a related piece of news on banks which caught my attention yesterday.
OCBC had made a highly unusual move to refinance a S$975 million bond issue way ahead of time by dangling more attractive interest rates to existing bond-holders to get them to take up the new bonds.
The existing bonds are not due to mature for another two years.
There have been suggestions this means that OCBC management is not confident of the financial storm subsiding even two years from now, and when the existing bonds come up for retirement, credit conditions might be even tougher, compared to now.
Their reasoning: If you think that the storm is going to intensify, you batten down the hatches even more securely to keep your investors and your business safe.
But OCBC’s move is another alarming signal that there is no early end to the problems in sight.
I wish I can sound more cheerful about the financial markets on a Friday morning, when the sun is brightly shining and all is quiet and peaceful outside, even as I write. Thank god, it is Friday.