Tag: Nasdaq bid price listing standard
SEC approves Nasdaq proposal related to bid price compliance periods and reverse splits
In July, the SEC posted a Nasdaq rule change proposal to “modify the application of the bid price compliance periods where a listed company takes an action to achieve compliance with the bid price requirement and that action causes noncompliance with another listing requirement.” (See this PubCo post.) The proposed rule change was designed to address instances where, to regain compliance with the minimum bid price required by Nasdaq listing rules, a listed company implements a reverse stock split; however, while the reverse split may bring the company into compliance with the minimum bid price requirement, it may also, at the same time, lead to non-compliance with another listing rule—particularly, the requirements for the number of publicly held shares and number of public holders, triggering a new deficiency process with a new time period for the company to seek to regain compliance. That’s excessive, Nasdaq said, and too confusing for investors, possibly adversely affecting investor confidence in the market. Because Nasdaq believed it was inappropriate for a company to receive additional time to cure non-compliance with the newly violated listing standard, it sought, with the proposal, to eliminate the additional compliance period that would otherwise result from the newly created deficiency. But by August, the SEC hadn’t yet approved the proposal and extended the deadline for approval. Now, Nasdaq has filed Amendment No. 2 to the proposal—primarily clarifications—and the SEC has just given its approval to the proposal as amended. As a result, companies will need to carefully calculate the potential impact of a reverse split on other listing requirements to avoid these consequences where possible.
Reverse split to regain bid price compliance? It may be more complicated than you think
Nasdaq has filed with the SEC a proposed rule change to “modify the application of the bid price compliance periods where a company takes action that causes non-compliance with another listing requirement.” Hmmm, how’s that again? This proposed rule change is designed to address instances where, to regain compliance with the minimum bid price required by Exchange listing rules, a listed company implements a reverse stock split; however, while the reverse split may bring the company into compliance with the minimum bid price requirement, it may also, at the same time, lead to non-compliance with another listing rule—particularly, the requirements for the number of public holders and number of publicly held shares (depending on treatment of fractional shares), triggering a new deficiency process with a new time period within which the company is permitted to seek to regain compliance. That’s excessive, Nasdaq says, and too confusing for investors, possibly adversely affecting investor confidence in the market. Because Nasdaq believes it is inappropriate for a company to receive additional time to cure non-compliance with the newly violated listing standard, it is seeking, with this proposed amendment, to eliminate the additional compliance period that would otherwise result from the newly created deficiency. Under the proposal, in the event a reverse split to achieve bid-price compliance leads to other non-compliance, the company would be deemed non-compliant with the bid price requirement until both the new deficiency (e.g., number of holders or number of publicly held shares) is cured and the company thereafter maintains a $1.00 bid price for a minimum of 10 consecutive business days. If the proposal is adopted, companies will need to carefully calculate the potential impact of a reverse split on other listing requirements to avoid these consequences where possible.
Nasdaq delays rule change expediting delisting process for certain bid price compliance issues
In April, the SEC approved a Nasdaq rule change to expedite delisting (1) for securities with a closing bid price at or below $0.10 for ten consecutive trading days during any bid price compliance period and (2) for securities that have had one or more reverse stock splits with a cumulative ratio of one for 250 or more shares over the prior two-year period. (See this PubCo post.) The rule change modified the Nasdaq listing rules to shorten compliance periods and permit earlier delisting and enhanced review procedures for securities in these two categories. As approved, the rule change would have been applicable for companies that first received notification of non-compliance after the date of the approval order, April 21. But, in the midst of a pandemic, was that rule change really the way to go? Apparently, Nasdaq has had some regrets. Now, the SEC has declared immediately effective another proposed rule change to delay the implementation date to September 1, 2020.
Nasdaq expedites delisting process for some bid price compliance issues
Nasdaq giveth and Nasdaq taketh away. Having temporarily tolled the compliance period for certain continued listing requirements (see this PubCo post), Nasdaq has now proposed, and the SEC has approved, a rule change to expedite delisting (1) for securities with a closing bid price at or below $0.10 for ten consecutive trading days during any bid price compliance period and (2) for securities that have had one or more reverse stock splits with a cumulative ratio of one for 250 or more shares over the prior two-year period.
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