Bermudian property/casualty reinsurer Max Re is being threatened with delisting from the Nasdaq stock exchange because it has failed to file its 10Q earnings report with the U.S. Securities and Exchange Commission by its May 10 deadline.
The company delayed the filing of its first-quarter results because it has not yet completed its internal audit of three finite risk retrocessional contracts covering it between 2001 and the end of 2005. If these contracts are deemed not to have met risk transfer standards it could reduce Max Re’s statutory 2005 earnings by “not more than approximately $25 million”, according to the firm.
In a report, Citigroup equity research analyst Joshua Shanker says the potential delisting left Max Re in an “uncomfortable situation”. Max Re announced the news on May 19. Shanker adds that the company’s decision to notify investors of its violation of Nasdaq Marketplace Rule 4320(e) (12) three days after it had received a warning from Nasdaq staff was unwise.
“In the case of releasing news of a potential de-listing on a Friday, after the market close, Max Re management appears to be somewhat imprudent,” his report reads. “While the Friday press release was in line with past company correspondence with investors, we believe that it still represents poor communication.”
Despite this, Shanker maintains a buy recommendation on the firm, noting that its stock price is undervalued – trading at about a 4% premium to book value.
He says Max Re’s management insists it can adequately explain its failure to comply with SEC regulations, and that its lawyers do not believe the company’s stock will be delisted.
Max Re now faces a hearing before the Nasdaq Listing Qualifications Panel, where its status on the exchange will be decided. It said in a statement that it intends to file its 10Q as soon as “reasonably practicable”, which it expects to be some time in June.
