Notice2021-25750
Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt Alternative Initial and Continued Listing Requirements for Acquisition Companies Listing on the Nasdaq Global Market
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
November 26, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 225 (Friday, November 26, 2021)</title>
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[Federal Register Volume 86, Number 225 (Friday, November 26, 2021)]
[Notices]
[Pages 67512-67517]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-25750]
[[Page 67512]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93622; File No. SR-NASDAQ-2021-092]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Adopt Alternative Initial and Continued Listing Requirements for
Acquisition Companies Listing on the Nasdaq Global Market
November 19, 2021.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on November 12, 2021, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to adopt alternative initial and continued
listing requirements for Acquisition Companies listing on the Nasdaq
Global Market.
The text of the proposed rule change is available on the Exchange's
website at <a href="https://listingcenter.nasdaq.com/rulebook/nasdaq/rules">https://listingcenter.nasdaq.com/rulebook/nasdaq/rules</a>, at
the principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Nasdaq is proposing to adopt alternative initial and continued
listing requirements for companies whose business plan is to complete
one or more acquisitions, as described in Listing Rule IM-5101-2 (an
``Acquisition Company''). As described below, such alternative listing
requirements do not replace the requirements of Listing Rule IM-5101-2,
which will continue to apply to all Acquisition Companies.
An Acquisition Company is a special purpose company formed for the
purpose of completing an initial public offering and engaging in a
merger or acquisition (a business combination) with one or more
unidentified companies within a specific period of time.\3\ The
securities sold by the Acquisition Companies in its initial public
offering (``IPO'') are typically units, consisting of one share of
common stock and one or more warrants (or a fraction of a warrant) to
purchase common stock, that are separable at some point after the IPO.
Management generally is granted a percentage of the Acquisition
Company's equity and may be required to purchase additional shares in a
private placement at the time of the Acquisition Company's IPO. Due to
their different structure, Acquisition Companies do not have any prior
financial history, at the time of their listing, like operating
companies.
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\3\ Pursuant to Listing Rule IM-5101-2 an Acquisition Company is
required, among other things, to keep at least 90% of the proceeds
from its IPO in an escrow account and, until the company has
completed one or more business combinations having an aggregate fair
market value of at least 80% of the value of the escrow account,
must meet the requirements for initial listing following each
business combination. If a shareholder vote on the business
combination is held, public shareholders voting against a business
combination must have the right to convert their shares of common
stock into a pro rata share of the aggregate amount then in the
escrow account (net of taxes payable and amounts distributed to
management for working capital purposes) if the business combination
is approved and consummated. If a shareholder vote on the business
combination is not held, the company must provide all shareholders
with the opportunity to redeem all their shares for cash equal to
their pro rata share of the aggregate amount then in the deposit
account.
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Historically, Acquisition Companies chose to list on the Nasdaq
Capital Market instead of the Nasdaq Global Market, in part, because it
had lower fees \4\ and lower initial distribution requirements.\5\
However, nothing in NASDAQ's rules prohibits an Acquisition Company
from listing on the Global Market.\6\ More recently, certain
Acquisition Companies have sought to list on the Nasdaq Global Market.
In particular, Nasdaq notes that a recent SEC statement about
accounting treatment by Acquisition Companies \7\ and subsequent and
more recent accounting comments to Acquisition Companies has resulted
in some Acquisition Companies adopting different accounting practices
and, as a result, having insufficient equity to qualify for initial
listing on the Nasdaq Capital Market. However, these companies could
list on the Nasdaq Global Market or on competing marketplaces, which
permit listing without any minimum equity requirement.\8\
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\4\ Recently, Nasdaq amended the rules to make the listing fees
and the timing of paying such fees for Acquisition Companies listing
on the Nasdaq Capital and Global Markets the same. See Securities
Exchange Act Release No. 92345 (July 7, 2021), 86 FR 36807 (July 13,
2021).
\5\ Listing Rules 5505(a)(2) and 5505(a)(3) require a Company to
have one million Unrestricted Publicly Held Shares and at least 300
Round Lot Holders in connection with the initial listing on the
Nasdaq Capital Market. See also Listing Rules 5505(a) and (b), which
generally require minimum bid price of at least $4 per share; at
least three registered and active Market Makers; and Market Value of
Unrestricted Publicly Held Shares of $15 million, Stockholders'
equity of at least $4 million, and Market Value of Listed Securities
of $50 million under the Market Value Standard.
\6\ Nasdaq Listing Rule 5310(i) provides that an Acquisition
Company is not eligible to list on the Nasdaq Global Select Market.
\7\ Staff Statement on Accounting and Reporting Considerations
for Warrants Issued by Special Purpose Acquisition Companies
(SPACs), by John Coates, Acting Director of the Division of
Corporation Finance, and Paul Munter, Acting Chief Accountant (April
12, 2021), available at: <a href="https://www.sec.gov/news/public-statement/accounting-reporting-warrants-issued-spacs">https://www.sec.gov/news/public-statement/accounting-reporting-warrants-issued-spacs</a>.
\8\ Nasdaq Rule 5405(b)(3) allows a company to list on the
Nasdaq Global Market with no equity if it has a Market Value of
Listed Securities of $75 million and a Market Value of Unrestricted
Publicly Held Shares of $20 million, along with satisfying price,
unrestricted publicly held shares, round lot holder and market maker
requirements. See also Section 102.06 of the NYSE Listed Company
Manual.
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Listing Rules 5405 and 5450 require all companies, including
Acquisition Companies, listing on the Nasdaq Global Market to have at
least 400 Round Lot Holders for initial listing and 400 Total Holders
for continued listing, respectively.\9\
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\9\ Round Lot Holder means a holder of a Normal Unit of Trading
of Unrestricted Securities. See Listing Rule 5005(a)(40). ``Round
Lot'' or ``Normal Unit of Trading'' means 100 shares of a security
unless, with respect to a particular security, Nasdaq determines
that a normal unit of trading shall constitute other than 100
shares. If a normal unit of trading is other than 100 shares, a
special identifier shall be appended to the Company's Nasdaq symbol.
See Listing Rule 5005(a)(39). ``Total Holders'' means holders of a
security that includes both beneficial holders and holders of
record. See Listing Rule 5005(a)(45).
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[[Page 67513]]
Given Nasdaq's long experience listing Acquisition Companies on the
Nasdaq Capital Market, and to facilitate capital formation, Nasdaq
proposes to adopt alternative listing requirements that would allow
Acquisition Companies to initially list their Primary Equity Security
(other than an ADR) on the Nasdaq Global Market with at least 300 Round
Lot Holders, and remain listed if they have at least 300 public
stockholders,\10\ provided that they meet certain additional
requirements for initial and continued listing described below. These
proposed requirements would be substantially similar to the NYSE
listing standards for Acquisition Companies.\11\
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\10\ ``Public stockholders'' exclude holders that are directors,
officers, or their immediate families and holders of other
concentrated holdings of 10% or more. See also Listing Rule
5005(a)(36) defining ``Public Holders'' as holders of a security
that includes both beneficial holders and holders of record, but
does not include any holder who is, either directly or indirectly,
an Executive Officer, director, or the beneficial holder of more
than 10% of the total shares outstanding.
\11\ Sections 102.06 and 802.01 of the NYSE Listed Company
Manual. Although these rules provide the NYSE with certain
discretion in determining the suitability for listing of an
Acquisition Company, under Listing Rule 5101, Nasdaq has broad
discretionary authority ``over the initial and continued listing of
securities in Nasdaq in order to maintain the quality of and public
confidence in its market, to prevent fraudulent and manipulative
acts and practices, to promote just and equitable principles of
trade, and to protect investors and the public interest.'' Nasdaq
further notes that while ``Nasdaq has broad discretion under Rule
5101 to impose additional or more stringent criteria, the Rule does
not provide a basis for Nasdaq to grant exemptions or exceptions
from the enumerated criteria for initial or continued listing, which
may be granted solely pursuant to rules explicitly providing such
authority.'' Listing Rule IM-5101-1.
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Initial Listing Requirements
As proposed, the new, alternative, listing requirements for
Acquisition Companies, including the distribution requirements would be
included in Listing Rule 5406. Under the proposal, Acquisition
Companies would have to have at least 1.1 million Publicly Held Shares
\12\ and at least 300 Round Lot Holders when listing in conjunction
with an IPO (rather than 400 Round Lot Holders as is the case
currently). Acquisition Companies transferring from other exchanges or
listing in connection with a quotation listing would be allowed to list
based on the distribution requirements of 1.1 million publicly held
shares \13\ at the time of initial listing on Nasdaq and
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\12\ ``Publicly Held Shares'' means shares not held directly or
indirectly by an officer, director or any person who is the
beneficial owner of more than 10 percent of the total shares
outstanding. See Listing Rule 5005(a)(35).
\13\ For Acquisition Companies that list at the time of their
IPOs, the rule will require that the offering be on a firm
commitment basis. If necessary, Nasdaq will rely on a written
commitment from the underwriter to represent the anticipated value
of the Acquisition Company's offering in order to determine an
Acquisition Company's compliance with certain listing standards,
including the number of Publicly Held Shares.
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(i) 300 Round Lot Holders;
(ii) 2,200 total stockholders together with average monthly trading
volume of 100,000 shares (for the most recent six months); or
(iii) 500 total stockholders together with average monthly trading
volume of one million shares (for the most recent twelve months).
To rely on these distribution requirements, Nasdaq proposes to
adopt market capitalization and the publicly-held shares quantitative
requirements that are more stringent than the current requirements
applicable to Acquisition Companies listing on the Nasdaq Global
Market.\14\
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\14\ See footnote 8 above.
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Under the proposed rule, an Acquisition Company must have Market
Value of Listed Securities of at least $100 million and Market Value of
Publicly Held Shares of at least $80 million at the time of initial
listing. Nasdaq notes that there are a number of Acquisition Companies
listed currently on other markets that would have met these revised
requirements and, in Nasdaq's view, there is no evidence that these
companies are unfit for exchange trading. The Exchange also notes that
its revised quantitative requirements would be the same as those of the
NYSE for Acquisition Companies.\15\
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\15\ Nasdaq notes that Acquisition Companies could list on the
NYSE under Section 102.06 on the basis of an aggregate market value
of least $100 million and market value of publicly-held shares of at
least $80 million. Nasdaq's understanding is that the NYSE
calculates the aggregate market value by multiplying the total
shares outstanding by the public offering price per share, which is
also how Nasdaq calculates the Market Value of Listed Securities.
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In addition to the proposed requirements described above, Nasdaq
proposes to require an Acquisition Company to satisfy all additional
requirements described in Listing Rule IM-5101-2; have at least four
registered and active Market Makers; and have a closing price or, if
listing in connection with an IPO, an IPO price of at least $4 per
share.\16\
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\16\ The Market Maker requirement is the same as the requirement
applicable to an Acquisition Company listing on the Nasdaq Global
Market under the Market Value Standard. See Listing Rule 5405(b)(3).
The minimum price requirement is similar to the bid price
requirement for an Acquisition Company listing on the Nasdaq Global
Market under the Market Value Standard, but is revised to reflect
that an Acquisition Company listing in connection with an IPO will
not have a bid price and to parallel the language used in the NYSE
rule. See Nasdaq Listing Rule 5405(a) and NYSE Listed Company Manual
Section 102.06.
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Finally, under the proposed rule, if the Acquisition Company lists
units, the components of the units (other than Primary Equity Security,
which must satisfy the requirements described above) must satisfy the
initial listing requirements for the Nasdaq Global Market applicable to
the component. If a component of a unit is a warrant, it must meet the
following additional requirements (in addition to the requirements of
Listing Rule 5410 \17\): \18\
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\17\ Among other things, Listing Rule 5410 requires that the
underlying security must be listed on the Global Market or be a
Covered Security.
\18\ Although Section 713.12 of the NYSE Listed Company Manual
provides the NYSE with certain discretion in reviewing the
eligibility for listing of warrants, under Listing Rule 5101, Nasdaq
has broad discretionary authority ``over the initial and continued
listing of securities in Nasdaq in order to maintain the quality of
and public confidence in its market, to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, and to protect investors and the public
interest.'' Nasdaq further notes that while ``Nasdaq has broad
discretion under Rule 5101 to impose additional or more stringent
criteria, the Rule does not provide a basis for Nasdaq to grant
exemptions or exceptions from the enumerated criteria for initial or
continued listing, which may be granted solely pursuant to rules
explicitly providing such authority.'' Listing Rule IM-5101-1.
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<bullet> At least 1,000,000 warrants outstanding;
<bullet> At least $4 million aggregate market value;
<bullet> Warrants should have a minimum life of one year; and
<bullet> The Exchange will not list warrant issues containing
provisions which give the company the right, at its discretion, to
reduce the exercise price of the warrants for periods of time, or from
time to time, during the life of the warrants unless (i) the company
undertakes to comply with any applicable tender offer regulatory
provisions under the federal securities laws, including a minimum
period of 20 business days within which such price reduction will be in
effect (or such longer period as may be required under the SEC's tender
offer rules) and (ii) the company promptly gives public notice of the
reduction in exercise price in a manner consistent with the Exchange's
immediate release policy set forth in Rules 5250(b)(1) and IM-5250-1.
The Exchange will apply the requirements in the immediately preceding
sentence to the taking of any other action which has the same economic
effect as a reduction in the exercise price of a listed warrant. This
policy will not preclude the listing of warrant issues for which
regularly scheduled and specified changes in the
[[Page 67514]]
exercise price have been previously established at the time of issuance
of the warrants.
Continued Listing Requirements
Nasdaq also proposes to adopt continued listing standards for
Acquisition Companies that initially listed under the proposed
alternative standard and align them with the proposed initial listing
standards. The requirements of Listing Rule IM-5101-2 also would
continue to apply to Acquisition Companies that initially listed under
the proposed alternative standard.
Under the proposed Rule 5452, until an Acquisition Company has
satisfied the condition of consummating its business combination
described in Rule IM-5101-2(b), Nasdaq will promptly initiate
suspension and delisting procedures if:
<bullet> The Acquisition Company's average Market Value of Listed
Securities is below $50 million or the average Market Value of Publicly
Held Shares is below $40 million, in each case over 30 consecutive
trading days. An Acquisition Company will not be eligible to follow the
procedures outlined in Rule 5810(c)(2) with respect to this criterion,
and will be subject to the procedures in proposed Rule 5810(c)(1),
which will provide that Nasdaq Staff will issue a Staff Delisting
Determination to such Acquisition Company informing the Company that
its securities are immediately subject to suspension and delisting.
Nasdaq will notify the Acquisition Company if its average Market Value
of Listed Securities falls below $75 million or the average Market
Value of Publicly Held Shares falls below $60 million and will advise
the Acquisition Company of the delisting standard;
<bullet> the Acquisition Company's securities initially listed
(either common equity securities or units, as the case may be), fall
below the following distribution criteria:
(1) At least 300 public stockholders (if a component of a unit is a
warrant, at least 100 warrant holders);
(2) at least 1,200 total stockholders and average monthly trading
volume of 100,000 shares (for most recent 12 months); or
(3) at least 600,000 Publicly Held Shares; \19\ or
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\19\ See footnote 12 above.
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<bullet> the Acquisition Company fails to consummate its business
combination, required by Rule IM-5101-2(b), within the time period
specified by its constitutive documents or required by contract, or as
provided by Rule IM-5101-2(b), whichever is shorter.
Nasdaq also proposes to adopt Rule IM-5452-1 to explain the
treatment of Acquisition Company units, and unit components, for
purposes of the distribution requirements. In the case of Acquisition
Company securities traded as a unit, such securities will be subject to
suspension and delisting if any of the component parts do not meet the
applicable continued listing standards. However, if one or more of the
components is otherwise qualified for listing, such component(s) may
remain listed.
For the purposes of determining whether an individual component
satisfies the applicable distribution criteria, the units that are
intact and freely separable into their component parts shall be counted
toward the total numbers required for continued listing of the
component. If a component is a warrant, (in addition to the
distribution requirement of 100 holders) the warrants will be subject
to the continued listing standards for warrants set forth in Rule 5455.
Under the proposed rule, if the Acquisition Company lists warrants,
the warrants must meet the following continued listing requirements (in
addition to the requirements of Listing Rule 5455): \20\
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\20\ Although Section 802.01D of the NYSE Listed Company Manual
provides the NYSE with certain discretion in the appraisal of the
suitability for continued listing of warrants, under Listing Rule
5101, Nasdaq has broad discretionary authority ``over the initial
and continued listing of securities in Nasdaq in order to maintain
the quality of and public confidence in its market, to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, and to protect investors and the
public interest.'' Nasdaq further notes that while ``Nasdaq has
broad discretion under Rule 5101 to impose additional or more
stringent criteria, the Rule does not provide a basis for Nasdaq to
grant exemptions or exceptions from the enumerated criteria for
initial or continued listing, which may be granted solely pursuant
to rules explicitly providing such authority.'' Listing Rule IM-
5101-1.
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<bullet> The number of publicly-held warrants is at least 100,000;
<bullet> The number of warrant holders is at least 100; and
<bullet> Aggregate market value of warrants outstanding is at least
$1,000,000.
Notwithstanding the foregoing, Nasdaq will consider the suspension
of trading in, or removal from listing of, any individual component or
unit when, in the opinion of Nasdaq, it appears that the extent of
public distribution or the aggregate market value of such component or
unit has become so reduced as to make continued listing on the Exchange
inadvisable. In its review of the advisability of the continued listing
of an individual component or unit, Nasdaq will consider the trading
characteristics of such component or unit and whether it would be in
the public interest for trading to continue.
Nasdaq also proposes to amend Rule 5810(c)(1) to align it with the
proposed rule by providing that if an Acquisition Company, which
qualified for listing pursuant to the alternative initial listing
requirements in Rule 5406, fails to comply with the additional
continued listing requirements in Rule 5452(a)(1), such failure will
constitute a deficiency that will immediately result in Nasdaq issuing
a Staff Delisting Determination with regard to the Acquisition
Company's Primary Equity Security and the securities will be subject to
immediate suspension and delisting.
Nasdaq also proposes to amend Rule 5815(a)(1)(B)(ii) to provide
that notwithstanding the provision that a timely request for a hearing
shall ordinarily stay the suspension and delisting action pending the
issuance of a written panel decision, a request made by an Acquisition
Company (which qualified for listing pursuant to the alternative
initial listing requirements in proposed Rule 5406) shall not stay the
suspension of the securities from trading if such company fails to meet
(i) the continued listing requirement in Rule 5452(a)(1); or (ii) the
requirements for initial listing immediately following a business
combination as required by Rule IM-5101-2.\21\ In each case, the
company's securities will be immediately suspended from trading and
will remain suspended unless the panel decision, if any, issued after
the hearing determines to reinstate the securities. If the Acquisition
Company does not request a hearing, then its securities will remain
suspended from trading until they are delisted following the deadline
to request such a hearing.
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\21\ IM-5101-2 provides that if an Acquisition Company ``does
not meet the requirements for initial listing following a business
combination . . . Nasdaq will issue a Staff Delisting Determination
under Rule 5810 to delist the Company's securities.'' Rule 5810
further provides that ``Staff Delisting Determinations . . . unless
appealed, subject the Company to immediate suspension and
delisting.''
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Nasdaq believes that the proposed modification to the distribution
requirements for Acquisition Companies is appropriate because of the
unique characteristics of the Acquisition Company structure.
Specifically, pending the completion of a business combination, each
share of an Acquisition Company represents a right to a pro rata share
of the Acquisition Company's assets held in trust, and, in
[[Page 67515]]
Nasdaq's view, as a result Acquisition Company shares typically have a
trading price close to their liquidation value. Therefore, Nasdaq
believes that the liquidity and market efficiency concerns relevant to
listed operating companies do not arise to the same degree with
Acquisition Companies, and, in Nasdaq's view, there is less need to
ensure that there are a large number of shareholders of an Acquisition
Company, as compared to a typical operating company, to create an
active market that generates appropriate pricing. Nasdaq also believes
that the proposed distribution requirements for Acquisition Companies
are appropriate because the proposed alternative listing requirements
for Acquisition Companies under Rule 5406 are generally equal to or
higher than the requirements otherwise applicable to Acquisition
Companies listing on the Nasdaq Capital Market.\22\ Nasdaq also notes
that Acquisition Companies have been listing on the NYSE for a number
of years subject to initial and continued requirements substantially
identical to those included in this proposal and that the proposed
amendments will enable Nasdaq to compete more effectively for
Acquisition Companies listings.
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\22\ See footnote 5 above.
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Finally, Nasdaq believes that the proposed rule change would not
affect the status of Nasdaq listed securities under Rule 3a51-1 of the
Act.\23\
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\23\ 17 CFR 240.3a51-1.
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2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\24\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\25\ in particular, in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general to protect investors and the public
interest.
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\24\ 15 U.S.C. 78f(b).
\25\ 15 U.S.C. 78f(b)(5).
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Nasdaq also believes that the proposal to adopt an alternative set
of listing requirements for Acquisition Companies is designed to
promote just and equitable principles of trade, and to remove
impediments to and perfect the mechanism of a free and open market
because the proposed standards would permit Nasdaq to list securities
of Acquisition Companies that meet specified criteria, including market
value, distribution, and price requirements, which should help to
ensure that the securities have sufficient public float, investor base,
and liquidity to promote fair and orderly markets. In addition,
Acquisition Companies would have to meet other existing investor
protection criteria, such as the escrow account requirement, public
shareholder approval requirement, public shareholder redemption rights,
and public shareholder liquidation preferences, which should further
the ability of investors to protect and monitor their investment
pending a business combination. Finally, Acquisition Companies that
list securities on Nasdaq would have to comply with all Nasdaq
corporate governance requirements applicable to operating companies.
Nasdaq also notes that Acquisition Companies have been listing on the
NYSE for a number of years subject to initial and continued
requirements nearly identical to those included in this proposal and
that the Commission previously found these initial listing standards to
be consistent with the requirements of the Act.\26\
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\26\ See e.g. Securities Exchange Act Release No. 80199 (March
10, 2017), 82 FR 13905 (March 15, 2017) (approving SR-NYSE-2016-72)
and Securities Exchange Act Release No. 81079 (July 5, 2017), 82 FR
32022 (July 11, 2017) (approving SR-NYSE-2017-11).
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The proposal is also designed to protect investors and the public
interest because, prior to a business combination, an Acquisition
Company would need to maintain average aggregate market value of listed
securities of at least $50 million and average market value of publicly
held shares of at least $40 million, in each case over 30 consecutive
trading days. Nasdaq would issue a Staff Delisting Determination under
Rule 5810 to delist the securities of Acquisition Companies that fall
below such requirements immediately and the Acquisition Companies could
not use the time period to cure deficiencies afforded to other
operating companies. In addition, the proposal is designed to protect
investors and the public interest because securities of Acquisition
Companies will be immediately suspended from trading, notwithstanding a
timely request for a hearing, in connection with a Staff Delisting
Determination under Rule 5810 based on the proposed market value of
listed securities and market value of publicly held shares
requirements. In these cases, the company's securities will be
immediately suspended and will remain suspended unless the panel
decision, if any, issued after the hearing determines to reinstate the
securities.
Nasdaq also believes that the proposed amendments to its rules to
adopt an alternative set of listing requirements containing lower
distribution requirements for Acquisition Companies are consistent with
the protection of investors because, in Nasdaq's view, Acquisition
Company shares typically have a trading price close to their
liquidation value. The Exchange's distribution standards are important
because the existence of a significant number of holders can be an
indicia of a liquid trading market, which supports an appropriate level
of price discovery. Because Acquisition Company shares typically trade
close to their liquidation value, in Nasdaq's view, price discovery is
less important than it is with operating companies and therefore there
is a reduced reliance on distribution requirements to assure
appropriate price discovery. Nasdaq also believes that the proposed
distribution requirements for Acquisition Companies are consistent with
the protection of investors because the proposed alternative listing
requirements for Acquisition Companies under Rule 5406 are generally
equal to or higher than the requirements otherwise applicable to
Acquisition Companies listing on the Nasdaq Capital Market.\27\ In
addition, a number of Acquisition Companies have listed on the NYSE
subject to identical distribution requirements to those proposed by the
Exchange and, in Nasdaq's view, there is no evidence that they have
proven unfit for exchange trading. It is also important to note that
any Acquisition Company that remains listed on the Nasdaq Global Market
after completing a business combination will be required to meet the
initial listing requirement of 400 round lot holders at the time of
consummation of the transaction.
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\27\ See footnote 5 above.
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Nasdaq believes that the proposed amendments to require that an
Acquisition Company, which qualified for listing under the proposed new
rule, that failed to meet the requirements for initial listing
immediately following a business combination may not stay the
suspension of the securities from trading by a timely request for a
hearing (following the issuance of a Staff Delisting Determination
under Rule 5810 to delist the securities) is designed to protect
investors and the public interest because it will help assure that the
combined company that failed to meet the initial listing requirements
will not trade on Nasdaq.
While the proposed alternative set of listing requirements for
Acquisition Companies is different from the requirements applicable to
operating companies and contains distribution
[[Page 67516]]
requirements for the listing of Acquisition Companies that would be
lower than those for other applicants seeking to list on the Nasdaq
Global Market, Nasdaq does not believe that this difference is unfairly
discriminatory because market value-based listing standards are largely
adopted to ensure adequate trading liquidity and, consequently,
efficient market pricing of a company's securities. As an investment in
an Acquisition Company prior to its business combination represents a
right to a pro rata share of the Acquisition Company's assets held in
trust, Acquisition Company shares typically have a trading price close
to their liquidation value and, in Nasdaq's view, the liquidity and
market efficiency concerns relevant to listed operating companies do
not arise to the same degree. As such, the Exchange does not believe it
is unfairly discriminatory to apply different distribution requirements
to Acquisition Companies than to other listing applicants.
Nasdaq also notes that Acquisition Companies listing under the
proposed rule will be subject to the existing requirements in Listing
Rule IM-5101-2 which requires that until the Company completes a
business combination within 36 months of the effectiveness of its IPO
registration statement, or such shorter period that the company
specifies in its registration statement (the Company must complete one
or more business combinations having an aggregate fair market value of
at least 80% of the value of the deposit account at the time of the
agreement to enter into the initial combination) the Acquisition
Company must notify Nasdaq on the appropriate form about each proposed
business combination. Following each business combination, the combined
Company must meet the requirements for initial listing. If the Company
does not meet the requirements for initial listing immediately
following a business combination or does not comply with one of the
requirements in Listing Rule IM-5101-2, Nasdaq will delist the
Company's securities.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The proposed rule change is
designed to enable Nasdaq to better compete with the NYSE, given the
Commission's recent guidance regarding accounting considerations for
Acquisition Companies, as described above, by adopting an alternative
set of listing requirements for Acquisition Companies that a greater
number of these companies will be able to meet at the time of their
IPOs. As such, it is intended to promote competition for the listing of
Acquisition Companies.
Nasdaq also does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act because the proposed rule change
will be available to all Acquisition Companies listing on Nasdaq and
all such companies will be able to choose which standards to list
under.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \28\ and Rule 19b-
4(f)(6) thereunder.\29\
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\28\ 15 U.S.C. 78s(b)(3)(A).
\29\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \30\ normally does not become operative for 30 days after the date
of its filing. However, pursuant to Rule 19b-4(f)(6)(iii),\31\ the
Commission may designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has requested that the Commission waive the 30-day operative delay so
that the Exchange can allow Acquisition Companies meeting the proposed
requirements to immediately list on the Nasdaq Global Market. The
Exchange states that such waiver would be consistent with the
protection of investors and the public interest because Acquisition
Companies are currently allowed to list on another national securities
exchange subject to initial and continued listing requirements that are
nearly identical to those included in this proposal.
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\30\ 17 CFR 240.19b-4(f)(6).
\31\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission believes that waiver of the 30-day operative delay
is consistent with the protection of investors and the public interest
because the proposed rule change is substantially similar to the rules
of another national securities exchange that were previously approved
by the Commission.\32\ Therefore, the Commission hereby waives the
operative delay and designates the proposed rule change operative upon
filing.\33\
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\32\ See supra notes 11 and 26, and accompanying text.
\33\ For purposes only of waiving the 30-day operative delay,
the Commission also has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#c6b4b3aaa3eba5a9ababa3a8b2b586b5a3a5e8a1a9b0"><span class="__cf_email__" data-cfemail="b4c6c1d8d199d7dbd9d9d1dac0c7f4c7d1d79ad3dbc2">[email protected]</span></a>. Please include
File Number SR-NASDAQ-2021-092 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2021-092. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will
[[Page 67517]]
post all comments on the Commission's internet website (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>). Copies of the submission, all subsequent
amendments, all written statements with respect to the proposed rule
change that are filed with the Commission, and all written
communications relating to the proposed rule change between the
Commission and any person, other than those that may be withheld from
the public in accordance with the provisions of 5 U.S.C. 552, will be
available for website viewing and printing in the Commission's Public
Reference Room, 100 F Street NE, Washington, DC 20549 on official
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of
the filing also will be available for inspection and copying at the
principal office of the Exchange. All comments received will be posted
without change. Persons submitting comments are cautioned that we do
not redact or edit personal identifying information from comment
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
NASDAQ-2021-092, and should be submitted on or before December 17,
2021.
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\34\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\34\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-25750 Filed 11-24-21; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on November 26, 2021.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.