Environmental Elements Corp. said yesterday that it will begin trading on the American Stock Exchange instead of the New York Stock Exchange on Nov. 1, and that it expects to post a loss for the second quarter of its fiscal year.
The Baltimore-based pollution control company is making the market switch because it does not expect to meet a new NYSE criterion that requires member companies to have market capitalization and shareholder equity of at least $50 million within one year.
"It's the equity component, not the market cap component, that causes the problem," said E. H. Verdery, chairman and chief executive officer. The company's ticker symbol, EEC, will not change.
With outstanding shares valued at $17 million, Environmental Elements could grow to a $50 million market capitalization in the coming year, Verdery said.
Delayed contracts and dormant backlog are expected to start coming to fruition during the second half of the year, so that should drive up earnings and possibly share price, he said.
But Verdery said it would take a merger or major acquisition of another company with high shareholder equity to reach the equity target in that time frame. "Even then, it would be very close," he said. "So, therefore, in the interest of the shareholders, we went ahead and made the move" to the American Stock Exchange.
Despite his hopes for the second half of its fiscal year, which began April 11, Environmental Elements warned yesterday that the second quarter will show a loss.
"Sales were slower than anticipated this summer, resulting, we believe, from companies' and governments' focus on planning instead of acting on environmental concerns," Verdery said.
Environmental Elements provides pollution control equipment, technology and services to industries throughout North America.
Shares of Environmental Elements were unchanged yesterday, closing at $2.4375.