Like Nasdaq (see this Pubco post), the NYSE has filed with the SEC, and the SEC has declared immediately effective, a rule change providing relief to listed companies that, in light of market conditions resulting from the impact of COVID-19, have fallen out of compliance with two of the NYSE continued listing standards. The relief will provide listed companies with a longer period to regain compliance with the Dollar Price Standard (i.e., when the average closing price of the security is less than $1.00 over a consecutive 30 trading-day period) and the $50 Million Standard (i.e., when a company’s average global market cap over a consecutive 30 trading-day period is less than $50 million and, at the same time, stockholders’ equity is less than $50 million) by tolling the compliance periods through June 30, 2020. Since the last week of February 2020, the NYSE has witnessed an unusually high number of listed companies that have fallen out of compliance with these continued listing standards. The NYSE “believes that it is undesirable to impose on companies in the midst of this crisis the additional burden of attempting to return to compliance with these market price-based standards while the crisis is ongoing, which may be unrealistic for many companies in the immediate term whereas their prospects may be better once the current extraordinary conditions have passed.”
Notwithstanding the tolling period, generally, the NYSE will otherwise generally continue to treat companies that are out of compliance as out of compliance. The NYSE will continue to identify companies that fall below the $50 Million Standard and the Dollar Price Standard during the Tolling Period and inform these companies of their noncompliance. The notified companies will still have to meet the applicable press release requirements and, where applicable, the Form 8-K disclosure requirement under SEC rules. The NYSE will also continue to attach a .BC indicator to these companies’ tickers to identify them as below compliance on the NYSE website during the Tolling Period. In addition, companies will still be required to submit compliance plans within the applicable time frames, and the NYSE will continue to review companies’ progress under their plans on a quarterly basis during the Tolling Period. The NYSE may also commence delisting proceedings against a company prior to the end of the maximum compliance plan period if the company fails to meet the material aspects of the compliance plan accepted by the NYSE or any of the quarterly milestones in that plan.
However, if the company is out of compliance for any time during the Tolling Period, that time period “would not be counted toward the maximum applicable compliance plan period of 18 months with respect to the $50 Million Standard or six months with respect to the Dollar Price Standard.” That is, under the Tolling Period, if any company is already in a “compliance period” related to the $50 Million Standard or the Dollar Price Standard at the time of commencement of the Tolling Period, the compliance period would be tolled and recommence on July 1, 2020. In addition, for companies newly identified as out of compliance with these listing standards during the Tolling Period, the applicable compliance plan periods would be calculated to begin on July 1, 2020.
A company that is already operating under a compliance plan related to the $50 Million Standard could be back in compliance, even during the Tolling Period, if the company were able to demonstrate (1) compliance with the $50 Million Standard, or (2) the ability to qualify under an original listing standard, in each case for a period of two consecutive quarters.
Similarly, any company that is already in a compliance period related to the Dollar Price Standard at the time of commencement of the Tolling Period will be able to regain compliance during the Tolling Period if, “at the expiration of its six-month cure periods established prior to the commencement of the Tolling Period, it has a $1.00 closing share price on the last trading day of the period and a $1.00 average share price based on the preceding 30 trading days.” For example, if a company’s current compliance period ends on May 30, 2020, it will be deemed to have returned to compliance if it meets the applicable requirements on May 30, even though the Tolling Period is in effect. If the company does not return to compliance as of May 30, its compliance period will be tolled tolled through June 30. In addition, if the company is in a compliance period at the time of commencement of the Tolling Period, it can still return to compliance before the specified end date of its compliance period if it has both a $1.00 closing share price on the last trading day of any calendar month during the previously established compliance period and a $1.00 average share price based on the 30 trading days preceding the end of that month.
The Tolling Period does not provide any additional compliance period if the NYSE has already commenced delisting proceedings against the company, including those that have exercised their appeal right.
The application of the Tolling Period in relation to the $50 Million Standard and the Dollar Price Standard is in addition to the ongoing temporary suspension of the $15 million market capitalization standard of Section 802.01B through and including June 30, 2020.
