Stem, Inc. (NYSE: STEM) Faces an 18-Month NYSE Listing Test

What happened

Stem, Inc. (NYSE: STEM) has not been delisted. Its shares can keep trading while the company tries to cure a New York Stock Exchange standard failure.

Stem, Inc. (NYSE: STEM) disclosed on October 23 that its 30-trading-day average market capitalization and stockholders' equity had fallen below the $50 million levels in NYSE Section 802.01B. The company intends to notify the exchange within 10 business days, then submit a plan within 45 days of the October 20 letter.

If the NYSE accepts the plan, Stem, Inc. (NYSE: STEM) gets an 18-month cure period with quarterly reviews. Continued trading still depends on following the plan and meeting the exchange's other listing rules.

Read more: Stem (STEM) stock analysis and investment case

Why it matters

The listing issue turns a turnaround story into a measurable balance-sheet test. Stem, Inc. (NYSE: STEM) sells software and services that help owners operate clean-energy assets. The notice does not interrupt operations, but it makes the capital structure harder to ignore.

Stem, Inc. (NYSE: STEM) reported a $269.571 million stockholders' deficit on June 30, versus a $249.442 million deficit at December 31. Reaching the positive $50 million equity level in the cited standard would require a $319.571 million improvement from the June balance sheet. The deficit widened by $20.129 million during those six months.

The counterargument is that the notice is a process, not a verdict. Stem, Inc. (NYSE: STEM) had $38.415 million of cash at June 30 and generated $7.975 million of operating cash during the first half. Better operating results, financing or other balance-sheet actions could support a plan.

The figures predate the notice, the company has not published its plan, and a single closing market value cannot establish the required 30-day average. The NYSE also must decide that any plan is credible.

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What's next

The first test is procedural: Stem, Inc. (NYSE: STEM) must deliver the plan on time, and the NYSE then has 45 days to decide whether it shows a reasonable path back to compliance.

The next financial report should show whether stockholders' equity, cash, liabilities and operating cash flow improved, and whether any financing changes the share count or creditor position. Quarterly NYSE milestones will matter after acceptance.

The investor question is therefore plan credibility, not immediate delisting. Stem, Inc. (NYSE: STEM) must show how it can close a large equity gap and rebuild its 30-day market-cap average without weakening the value left for common shareholders.

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Sources

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Originally published on OptimistFi, evidence-first equity research. More at optimistfi.com.