Advanced Environmental Recycling Technologies begins trading on the over-the-counter bulletin board exchange today, a move characterized as the most cost-effective option for a business that’s been out of compliance with Nasdaq regulations for the last two years.
Trading on the new exchange disqualifies the Springdale business’ stock from listing on the Arkansas Index, a price-weighted gauge developed by Bloomberg News and the Arkansas Democrat-Gazette at the end of December 1997.
Joe Brooks, AERT’s chairman, said Monday that even though AERT stock will trade on a different exchange, management is adopting a “business as usual” attitude as it pursues getting a new plastic recycling facility in Watts, Okla., up and running by the first of February.
And the move to the bulletin board is another positive for investors, he said.
The decision to move to the lower profile bulletin board will help AERT maintain liquidity and spur revenue growth, the manufacturer of exterior deck boards said in a news release Monday. Nasdaq is the country’s largest electronic stock exchange, representing around 3,200 companies.
AERT’s stock has traded and closed below $1 per share since December 2007, a violation of Nasdaq’s minimum-bid requirement.
Shares of AERT closed at 37 cents per share Monday on the Nasdaq, where its stock has traded as high as 75 cents and as low as 12 cents per share over the last year.
The company explored the option of a reverse stock split and received board of director approval in June for a 20-to-1 split, if needed.
Vernon J. Richardson, professor of accounting at the University of Arkansas’ Sam M. Walton College of Business in Fayetteville, said trading on the bulletin board will likely help AERT’s financial situation, since the costs of a reverse stock split would have been potentially draining.
“AERT would have had to sell more equity at a low cost,” he said. By trading on the bulletin board, however, the company has time to wait for its fundamentals to turn around. Once AERT can make a profit, “then the price of its stock will go up and everything will take care of itself.”
Richardson, who has previously acted as a paid consultant for the manufacturer, said he remains bullish about AERT’s turnaround since the business is attempting to correct several problems related to profitability.
AERT widened a net loss in the third quarter after reporting a profit in the second quarter that had stemmed a string of net losses from 11 consecutive quarters.
Part of AERT’s financial difficulties during the past two years are related to the national housing and home remodeling markets, which bottomed out, and the increased price of petroleum. AERT uses virgin plastic resin, a petroleum byproduct, in addition to recycled plastic and waste wood to make its decking boards.
“It’s been one thing after another,” Richardson said. “The economy has to turn around for them.”
Keith Johnson, an equity analyst who covers an AERT competitor for Morgan Keegan & Co., a Memphis-based investment bank, said the 2010 economic outlook for the housing market, which helps determine demand for composite lumber products, varies with the source.
Home builders and Realtors, for example, have different projections but most point to double digit growth for a sector expected to see housing starts average 750,000 units next year.
But head winds for the housing and remodeling markets will remain from high unemployment levels and tight lending standards. Johnson added that because of the economic conditions, the market demand for composite lumber is smaller than it was two or three years ago.
“Residential construction looks like its getting better,” Johnson said. But the growth is “coming from comparatively low levels of activity in 2009.” To contact this reporter:
Business, Pages 23 on 12/29/2009