The exchange unveiled the de-listing on Tuesday, citing Grubb's inability to meet two points in its listings criteria: a "$50-million average market capitalization and $50-million stockholders' equity." In a statement, stock-exchange spokespeople added that Grubb "does not expect to be able to comply on a going-forward basis." Grubb (GBE) closed yesterday's trading at $1.35 per share, down from its Wednesday high of $1.60.

"Such a move is very unfortunate, both in terms of perception and reality," says Raymond Mathis, an equity analyst at Standard & Poor's. Mathis, who does not track Grubb & Ellis formally, but keeps a close eye on the real estate industry, spoke to the general impact of a NYSE de-listing. "The perception is negative, and even if the shares do trade over the counter, the investors' sentiment generally is negative and the overwhelming probability is that share prices will continue to drop. It's unfortunate because the firm is well-respected and provides quality services."

Another observer bets that the switch to OTC as a trading alternative might be only a stop-gap measure on the firm's way back to private ownership. Grubb went public in 1980 and joined the NYSE three years later. He also insisted that, despite Mathis' warning, the NYSE's move is not a sign of fiscal troubles.

"They are in the same financial health as six months ago; no better or worse," he says. "The market perceives that Grubb is financially unstable, and that is totally incorrect."

But, as Mathis indicates, that won't prevent a crisis in confidence--a road the firm already traveled once this year in the aftermath of its acquisition talks with CB Richard Ellis. The internal memo--issued jointly by Kojaian and president and CEO Barry M. Barovick--addresses this issue for staff members nationwide:

"Please be assured, our exchange listing bears no relation to the financial stability of our company, and our capital reserves and bank lines remain unchanged," the memo says.

By stock exchange regulation, companies marked for de-listing can appeal--and typically they do, says one insider. In this case, both sides acknowledge that Grubb chose not to. But S&P's Mathis says that there is little point in appealing. "The NYSE tends to maintain a hard line," he explains. The choice to forego an appeal was also addressed in the internal memo: "We have the right to challenge this decision but have decided not to do so for several strategic reasons.

"As the ownership of our company continues to be concentrated among a small number of investors, our common stock remains thinly traded," the memo explains. "In a real estate market such as we face today, it no longer makes good business sense to carry the significant expense and deal with the restrictions of the NYSE, which are clearly geared for companies with much higher trading volumes and which are more widely held.

"We anticipate that the company will experience significant cost savings as a result of the move," the note continues. "Michael and I agree that the firm's energy and capital are far better spent in the long run on building our book of business rather than worrying daily about our stock price or market cap."

The memo goes on to say that Kojaian has increased his stake in the company, a move he acknowledged as a sign of confidence in his firm. "Last month, I converted my loan to the company into equity," the memo pointed out. As a result, Kojaian-related entities now have approximately 58% percent voting control of the company. I have voted with my capital and cannot be any clearer on my position." In March of this year Kojaian became the firm's majority shareholder.

Neither Grubb & Ellis nor NYSE executives were granting interviews for this story.

Instant Insights /

GlobeSt.com EXCLUSIVE: Going Private Might Be Grubb's Option in Wake of NYSE De-Listing

Related Stories

Recommended For You