Twin Cities-Based Public Co. Delists Stock, “Goes Dark”

Granite City Food & Brewery said that disclosure costs did not outweigh the benefit of being a reporting public company.

Granite City Food & Brewery recently announced that it is deregistering its stock in order to eliminate the expense of disclosing certain information to the U.S. Securities and Exchange Commission (SEC).

The St. Louis Park-based restaurant chain had already moved its shares to the OTCQB marketplace, a so-called “over-the-counter” exchange, after it was delisted from the Nasdaq exchange in April for failing to meet that exchange’s minimum shareholders’ equity requirements.

Then, Granite City said in late October that it was considering deregistering its shares altogether, or “going dark,” in order to cut costs.

The company confirmed last week that it is indeed deregistering its stock. Granite City’s board “determined to take this action as a means of reducing the significant regulatory costs associated with public reporting,” the company said. A Monday morning call to Granite City seeking additional information was not immediately returned.

When a company “goes dark,” it is no longer required to file annual or quarterly reports, proxies, or other documents with the SEC—a process that can be time-consuming and expensive. In fact, disclosure costs can easily exceed $500,000 a year for even small companies, according to a Star Tribune column about “going dark.”

But a lack of public filings also dramatically reduces the amount of information that is readily available about a company—giving investors less insight into the firm’s finances and future outlook.

While ceasing to file with the SEC will greatly decrease the information available about the company, Granite City said that it intends to provide shareholders “periodic financial and operational information through the OTC Markets Group website.” It will also file a 2013 annual report with the SEC.

“Following its review of the benefits and costs associated with being publicly traded as a reporting company, the board concluded that the financial burden of reporting was greater than the benefit of remaining registered,” Granite City CEO Rob Doran said in a statement.

Granite City said that, while its stock will no longer be listed on the OTCQB, its shares may be “quoted on the OTC Pink.” That marketplace is for “all types of companies that are there by reasons of default, distress, or design,” and the amount of information the companies disclose varies, according to the OTC Markets website.

Granite City warned, however, that “there can be no assurance that trading in the company’s common stock will continue on any particular quotation medium.”

Granite City opened its first restaurant in 1999. It currently operates two different brands: Granite City Food & Brewery and Cadillac Ranch All American Bar & Grill; in late 2011 and early 2012, it acquired several Cadillac Ranch locations from Columbus, Ohio-based Cadillac Ranch Group.

Today, the company operates 30 Granite City restaurants in 13 states and six Cadillac Ranch restaurants in five states—and it has grown to become one of Minnesota’s 65 largest public companies based on its revenue, which totaled $120.9 million in 2012.

But Granite City, which has about 3,200 employees, has been losing money. For the quarter that ended October 1, its net loss totaled $1.7 million, compared to a loss of $888,946 for the third quarter of 2012. Its loss for the second quarter of 2013, which ended July 2, totaled $496,570.