Homestore released news late afternoon on Friday December 21st that was so potentially explosive that the NASDAQ halted trading on its ticker symbol first thing on Monday, December 24th. At publication time, trading was still halted, and it could stay suspended for a long time.

The news? That the company must restate its financial results as it conducts an inquiry into its own accounting practices.

It is an inquiry? What an understatement. Since when do companies trigger a halt to ascending stock prices to "inquire" into their own accounting practices? Was this a noble self-sacrifice or did a regulator like the NASD or the SEC ask for this inquiry?

"It's not unusual at all for a company to investigate its own accounting practices. We have some outside experts that are assisting us," says Gary Gerdemann, senior director, corporate communications for Homestore. "We don't have the full scope of details - how did it start, when will it end, etc. I don't have those details."

No one else has details either, and certainly not until the NASD and SEC are satisfied that there will be no material announcements that will significantly impact the stock - up or down. That begs the question - what other bad news is coming down the pike? And it could be bad, if the abrupt exit of CFO Joseph Shew is any harbinger. He took the top accounting job at Homestore in March and vacated it ten months later, nearly two million dollars richer.

Homestore's statement that its results must be restated without naming which quarters are in question or how many quarters back the inquiry will go doesn't bode well. The company also stated that it had retained independent counsel and independent accountants to assist with the inquiry. That's why the stock could be in for a long haul. If multiple quarters' results are being probed, the new accountants have quite a bit of work cut out for them. There won't likely be an answer found overnight, and then any answers found must pass muster with the NASD and SEC.

The only good news for Homestore is that it only has two halts against it, a T.1 for pending news, and a T.12, a halt requesting more information. What Homestore doesn't want is any news that may indicate irregular activity or worse which could trigger an H.11 - a halt for regulatory concern.

How rare is it for a stock to be halted from trading, catapulting its investors and customers into limbo? What do the halts mean?

According to Mike DeMeo, spokesperson for NASDAQ, halts can be issued for a wide variety of reasons such as the news that a company is going to be acquired or that it is declaring bankruptcy, or that it has a product announcement. The way it works is that the companies notify NASDAQ with their news by sending it to Stockwatch or Marketwatch. NASD, NASDAQ's parent, and NASDAQ look over the news to see if the news is going to impact the company's stock in a positive or negative way. "What we look for is news that will significantly affect the value of the stock," says DeMeo.

"If you go to www.nasdaqnews.com, at the newsroom there is a link to 'trading halts'," instructs DeMeo. "You'll see a long list of companies that are halted with all different reason codes for pending news, or to request more information or other reasons."

One company on the list with the same halt codes as Homestore, Novo Networks, Inc., has been suspended from trading since July.

So why did NASDAQ halt trading on Homestore? "The communication between NASDAQ and the companies is nonpublic, so we can't comment on those," says DeMeo. "Homestore's halts for news pending and requesting additional information are not specific.

How long will the halts last? "There's no time frame for when this halt will come off - there are companies that have been halted since May," he says. "It could last for months."

With so many billions lost on the NASDAQ over the last year, is NASDAQ getting more policelike? Is that what is behind Homestore's corporate colonic? "Our parent NASD is our regulator, and they have always done this to secure the fair trading of issues," says DeMeo.

What about fraud? "That’s where NASD comes in, and they look at the issues. There is a code for irregularities, H.11, a halt for regulatory concern. The SEC can also suspend trading if it has a concern. I don't have specifics about Homestore, but a lot of companies that are under watch or halt will come out publicly and say why they are being halted."

What about the investors - are they the last to know when a company has good or bad news? Again, DeMeo points inquiries to Nasdaqnews.com (or Nasdaqtrader.com). "They are the first to know," explains DeMeo. "If you go to www.nasdaqtrader.com and if you go to trading halts, you will see a bunch of companies that are being halted,and it lists when a stock is resumed. That list is refreshed at the end of the day. Traders have access to this all the time, and if they are trading in the stock, then they know to go there and be on the lookout."

After a slate of bad news, is Homestore going to be able to recover from trade suspension? The halts will not impact Homestore's ability to serve its customers, assures Gerdemann. "We continue to be the leader of our field, and we serve hundreds of thousands of customers," he says. "We are confident of our business, and will continue to concentrate on customer service."