Tag: reverse stock split
NYSE proposes trading halt in the event of reverse stock split
In 2023, as a corollary to revised listing standards related to notification and disclosure of reverse stock splits, Nasdaq adopted a rule change providing for a new regulatory halt procedure specific to the pre-market trading and opening of a Nasdaq-listed security undergoing a reverse stock split. Pointing to an increased volume of reverse splits, Nasdaq believed that the proposed amendment would help to better detect errors that might result from “market participants’ processing of the reverse stock split, including incorrect adjustment or entry of orders” before trading in the stock begins. (See this PubCo post.) Although, according to the NYSE, it has not experienced the same increased volume of reverse stock splits, it has now proposed to follow suit by amending Rule 123D (Halts in Trading) to “set forth specific requirements for halting and resuming trading in a security that is subject to a reverse stock split.” The proposed rule change has become effective under Rule 19b-4(f)(6).
SEC approves Nasdaq rule change regarding reverse stock splits
In August, the SEC posted a proposed Nasdaq rule change that would establish listing standards related to notification and disclosure of reverse stock splits. According to the Nasdaq proposal, the volume of reverse splits processed by Nasdaq has increased substantially from 94 in 2020, 31 in 2021and 196 in 2022 to 164 reverse splits—just as of June 23, 2023. In most cases, Nasdaq observed, the purpose of the reverse splits was to comply with Nasdaq’s $1 minimum bid price requirement to remain on the Capital Market tier. In light of this increased volume, Nasdaq proposed amendments to its listing rules to “enhance the ability for market participants to accurately process these events, and thereby maintain fair and orderly markets.” Failure to comply could result in a trading halt. Last week, the SEC approved the proposed rule change. It’s worth noting that, as a corollary to the new reverse split listing standards, Nasdaq has also submitted to the SEC a separate rule proposal to adopt a new regulatory halt procedure specific to securities in the process of a reverse split.
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