Tag: NYSE listing standards
NYSE proposes to allow continued SPAC listing for additional six months
For those doing SPACs, you may want to take note of this recent proposed rule change from the NYSE. The proposal would amend Section 102.06 of the Listed Company Manual to allow a SPAC to “remain listed until forty-two months from its original listing date if it has entered into a definitive agreement with respect to a business combination within three years of listing.”
NYSE’s proposed listing standards for Natural Asset Companies bite the dust
Last year, the NYSE proposed to adopt new listing standards for the common equity securities of a “Natural Asset Company,” a new type of public company defined by the NYSE as “a corporation whose primary purpose is to actively manage, maintain, restore (as applicable), and grow the value of natural assets and their production of ecosystem services.” Although existing regulatory and listing requirements would continue to apply to NACs, the proposal contemplated, in addition, a fairly elaborate new NAC governance and reporting ecosystem involving specific provisions in corporate charters, new mandatory policies (environmental and social, biodiversity, human rights, equitable benefit sharing), new prescribed responsibilities for audit committees and a new reporting framework, including mandatory “Ecological Performance Reports.” (See this PubCo post.) Why did the NYSE introduce this proposal? Notwithstanding all of the developments in ESG disclosure and investing (such as ESG funds), the NYSE contended that “investors still express an unmet need for efficient, pure-play exposure to nature and climate.” According to the Intrinsic Exchange Group, which pioneered the NAC concept and advises public sector and private landowners on the creation of NACs, “[b]y taking a NAC public through an IPO, the market transaction will succeed in converting the long-understood—but to-date unpriced—value of nature into financial capital. This monetization event will generate the funding needed to manage, restore, and grow healthy ecosystems around the world and bring us closer to achieving a truly sustainable, circular economy.” At the time of the proposal, I asked whether this proposal would be a game changer to rescue our environment or merely a chimera? The answer, at least for now, seems to be chimera. In December, the SEC instituted proceedings to determine whether to approve or disapprove the proposal, asking for comment on a number of questions that were based broadly on concerns raised by commenters, such as issues regarding the licensing arrangements for NACs and the relationship between NYSE and IEG. Then, on January 17, 2024, the NYSE withdrew its proposal. Why?
SEC approves amended NYSE proposal to relax shareholder approval requirements for certain equity sales
Happy new year! In September last year, the SEC posted a new NYSE proposed rule change that would “modify the circumstances under which a listed company must obtain shareholder approval of a sale of securities to a substantial security holder,” a holder of 5% or more. (See this PubCo post.) Under current listing rules, shareholder approval is required for sales in excess of 1% of the common stock to a substantial security holder, unless the transaction is a cash sale for a price that is at least equal to the “Minimum Price.” Under the proposal, the shareholder approval requirement would be narrowed to apply only to control parties—that is, in addition to directors and officers, to substantial security holders with indicia of control. By eliminating the shareholder approval requirement for sales to passive holders—which the NYSE views as unnecessary—the proposal is designed to facilitate the ability of NYSE-listed companies to raise necessary capital. Now the SEC has posted Amendment No. 1 to the proposal, which provides additional explanation of the reason the NYSE proposed the rule change and amends the rule text in several ways. The release indicates that the SEC has approved the proposed rule change, as modified by Amendment No. 1, on an accelerated basis.
NYSE proposes listing standards for a “natural asset company”—what’s that?
The NYSE has proposed to adopt new listing standards for the common equity securities of a “Natural Asset Company,” a new type of public company defined by the NYSE as “a corporation whose primary purpose is to actively manage, maintain, restore (as applicable), and grow the value of natural assets and their production of ecosystem services.” And, “where doing so is consistent with the company’s primary purpose,” a NAC would also be required to “seek to conduct sustainable revenue-generating operations,” and “may also engage in other activities that support community well-being, provided such activities are sustainable.” In addition, NACs would be prohibited from engaging in unsustainable activities, that is, activities that “cause any material adverse impact on the condition of the natural assets under its control, and that extract resources without replenishing them.” Although existing regulatory and listing requirements would continue to apply to NACs, in many ways, the proposal contemplates something approaching a new NAC governance and reporting ecosystem, if you will, that would involve specific provisions in corporate charters, new mandatory policies (environmental and social, biodiversity, human rights, equitable benefit sharing), new prescribed responsibilities for audit committees and a new reporting framework, including mandatory “Ecological Performance Reports.” Why did the NYSE introduce this proposal? Notwithstanding all of the developments in ESG disclosure and investing (such as ESG funds), the NYSE contends that “investors still express an unmet need for efficient, pure-play exposure to nature and climate.” According to the Intrinsic Exchange Group, which pioneered the NAC concept and advises public sector and private landowners on the creation of NACs, “[b]y taking a NAC public through an IPO, the market transaction will succeed in converting the long-understood—but to-date unpriced—value of nature into financial capital. This monetization event will generate the funding needed to manage, restore, and grow healthy ecosystems around the world and bring us closer to achieving a truly sustainable, circular economy.” Will this proposal be a game changer to rescue our environment or merely a chimera? Time will tell. The proposal is open for comment for 21 days following publication in the Federal Register.
NYSE proposes to relax shareholder approval requirements for certain equity sales
On Friday last week, the SEC posted a new NYSE proposed rule change that would “modify the circumstances under which a listed company must obtain shareholder approval of a sale of securities to a substantial security holder,” a holder of 5% or more. Under current listing rules, shareholder approval is required for sales in excess of 1% of the common stock to a substantial security holder, unless the transaction is a cash sale for a price that is at least equal to the “Minimum Price.” Under the proposal, the shareholder approval requirement would be narrowed to apply only to control parties, that is, in addition to directors and officers, the shareholder approval requirement would apply to “a controlling shareholder or member of a control group or any other substantial security holder of the company that has an affiliated person who is an officer or director of the company.” By eliminating the shareholder approval requirement for sales to passive holders—which the NYSE views as unnecessary—the proposal is designed to facilitate the ability of NYSE-listed companies to raise necessary capital. Comments on the proposal are due 21 days after publication of the proposal in the Federal Register.
SEC approves NYSE and Nasdaq delay of timing of clawback policy compliance
Last week, both the NYSE and Nasdaq filed with the SEC amendments delaying until October 2 the effective dates of their proposed listing standards requiring listed issuers to develop and implement clawback policies. On Friday afternoon, the SEC approved the proposed rule changes, as modified by the respective Amendments No. 1, on an accelerated basis. What does that time delay mean for companies? Under the SEC final rules and the proposed listing standards, each listed issuer is required to adopt the mandated clawback policy no later than 60 days following the effective date of the rule. Prior to the amendments, the effective dates were designated by both exchanges as the SEC approval dates, which the SEC had just extended to June 11. (See this PubCo post.) Now, with October 2 as the effective date for both proposals, companies will have until December 1 to put their clawback policies in place.
It takes a unicorn? SEC approves NYSE rule change to facilitate direct listings
The chatter has it that some unicorns are considering skipping the standard underwritten IPO in favor of a “direct listing.” Essentially, this process involves a registered sale by selling shareholders directly into the public market with no intermediary underwriter and—imagine this—no underwriting commissions and no roadshow or similar expenses. Of course, there’s also the small matter of no proceeds to the company. What’s more, companies may be on their own when it comes to any marketing effort, otherwise typically provided by the bankers, and there may be only limited banker support of the stock price in the aftermarket. And what about that first day pop in the stock that can breed so much excitement? Of course, many companies have taken advantage of the fertile territory for capital raising provided by the private markets—after all, that’s how they got to be unicorns—and may have no need of additional capital at this point. Their motivation for becoming public may have more to do with shareholder liquidity and obtaining the “currency” that publicly traded stock can provide in the context of acquisitions and similar transactions. Whether the “direct listing” route to going public catches fire remains to be seen.
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