IPO

Compliance Deadlines For Nasdaq Board Diversity Rules

On August 6, 2021, the SEC approved Nasdaq’s board diversity listing standards proposal. Nasdaq Rule 5605(f) requires Nasdaq listed companies, subject to certain exceptions, to: (i) to have at least one director who self-identifies as a female, and (ii) have at least one director who self-identifies as Black or African American, Hispanic or Latino, Asian, Native American or Alaska Native, Native Hawaiian or Pacific Islander, two or more races or ethnicities, or as LGBTQ+, or (iii) explain why the company does not have at least two directors on its board who self-identify in the categories listed above. The rule changes also made headlines in most major publications. One of the most common themes in the press was the lack of inclusion of people with disabilities in the definition of an “underrepresented minority” for purposes of complying with the new rules.

The original rules had tiered compliance deadlines which Nasdaq (and practitioners) found confusing and unnecessarily complicated. On December 14,

January 3, 2023

Small-Cap IPO Volatility – The China Connection

Less than two months after the PCAOB and the China Securities Regulatory Commission and Ministry of Finance signed a Statement of Protocol reaching a tentative deal to allow the PCAOB to fully inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong, Nasdaq effectively halted all small-cap IPOs with a China connection. This time, the issue is not audit-related.

During the week of September 19, one of our clients had a deal ready to be priced and begin trading on Nasdaq. We had thought we cleared all comments when a call came from our Nasdaq reviewer – all small-cap IPOs were being temporarily halted while the Exchange investigated recent volatility. The same day, an article came out on Bloomberg reporting on 2200% price swings (up and then steeply back down) on recent IPOs involving companies with ties to China – a repeat of similar volatility in the late ’80’s and early ’90’s despite three decades of

December 6, 2022

Final Rules On The Foreign Companies Accountable Act; PCAOB Reached Deal WIth China And Hong Kong – Part III

The Holding Foreign Companies Accountable Act (“HFCA”) was adopted on December 18, 2020, requiring both the SEC and the PCAOB to adopt rules and procedures implementing its provisions. The HFCA requires foreign-owned issuers to certify that the PCAOB has been able to audit specified reports and inspect their audit firm within the last three years. If the PCAOB is unable to inspect the company’s public accounting firm for three consecutive years, the company’s securities are banned from trading on a national exchange.

As part of the HFCA’s implementation, on November 5, 2021, the SEC approved PCAOB Rule 6100 establishing a framework for the PCAOB’s determination that it is unable to inspect or investigate completely registered public accounting firms located in foreign jurisdictions because of a position taken by an authority in that jurisdiction (see HERE) On December 2, 2021, the SEC adopted amendments to finalize rules implementing the submission and disclosure requirements in the HFCA (see HERE) and

October 4, 2022

Final Rules On The Foreign Companies Accountable Act; PCAOB Reached Deal WIth China And Hong Kong – Part II

As part of the HFCA’s implementation, on November 5, 2021, the SEC approved PCAOB Rule 6100 establishing a framework for the PCAOB’s determination that it is unable to inspect or investigate completely registered public accounting firms located in foreign jurisdictions because of a position taken by an authority in that jurisdiction (see HERE.) On December 2, 2021, the SEC adopted amendments to finalize rules implementing the submission and disclosure requirements in the HFCA and published a sample

September 27, 2022

SEC Proposes New Rules For SPACs – Part 5

On March 30, 2022, the SEC proposed rules related to SPAC and de-SPAC transactions including significantly enhanced disclosure obligations, expanding the scope of deemed public offerings in these transactions, making a target company a co-registrant when a SPAC files an S-4 or F-4 registration statement associated with a business combination, and aligning de-SPAC transactions with initial public offering rules. In addition, the SEC has also proposed rules that would deem any business combination transaction involving a reporting shell company, including but not limited to a SPAC, to involve a sale of securities to the reporting shell company’s shareholders. The new rules would amend a number of financial statement requirements applicable to transactions involving shell companies.

In addition to proposing new rules for SPAC and de-SPAC transactions, the SEC is proposing new Securities Act Rule 145a that would deem all business combinations with an Exchange Act reporting shell to involve the sale of securities to the reporting shell company’s

May 10, 2022

SEC Proposes New SPAC Rules – Part 2

On March 30, 2022, the SEC proposed rules enhancing disclosure requirements associated with SPAC initial public offerings (IPOs) and de-SPAC merger transactions; requiring that a private operating company be a co-registrant when a SPAC files an S-4 or F-4 registration statement associated with a business combination; requiring a re-determination of smaller reporting company status within four days following the consummation of a de-SPAC transaction; amending the definition of a “blank check company” to make the liability safe harbor in the Private Securities Litigation Reform Act of 1995 for forward-looking statement such as projections, unavailable in filings by SPACs and other blank check companies; and deeming underwriters in a SPAC IPO to be underwriters in a de-SPAC transaction when certain conditions are met.

The proposed rules would require specialized disclosure with respect to compensation paid to sponsors, conflicts of interest, dilution and the fairness of business combination transactions. Further disclosures will also be required in connection with the use of projections.

April 19, 2022

SEC Proposes New SPAC Rules – Part 1

As I wrote about last week, the SEC has had a very busy rule-making few weeks. In addition to issuing six new compliance and disclosure interpretations (C&DI) for merger and acquisition transactions, most of which directly impact SPAC business organization transactions, it also proposed new rules on SPACs and all shell companies in a 372-page release. The new C&DI were the topic of last week’s blog (HERE) and in a multi-part blog series, I am delving into the proposed new SPAC rules.

April 12, 2022

SEC Issues New Mergers And Acquisitions Related C&DI

Last week was a very busy regulatory week for the SEC, including issuing six new compliance and disclosure interpretations (C&DI) for merger and acquisition transactions, most of which directly impact SPAC business organization transactions; proposed rules on SPACs’ shell companies and the use of financial projections; proposed rules to modify the definition of “dealer” for purposes of broker-dealer registration requirements; and a new accounting bulletin impacting the accounting treatment of cryptocurrencies by exchanges. This blog will discuss the new C&DI.

Background

The rules related to disclosure obligations, including in Forms 8-K, S-4 registration statements and proxy materials, and the filing of exhibits associated with a material contract, including merger agreements, have evolved over the past few years (see here related to confidential treatment of material contracts – HERE). In March 2021, the SEC issued a statement discussing certain legal specifics associated with a SPAC, including expressing concerns regarding disclosures associated with a de-SPAC transaction (i.e., a business

April 5, 2022

Annual Report of Office of Advocate for Small Business Capital Formation

The Office of the Advocate for Small Business Capital Formation (“Office”) issued its 2020 Annual Report and it breaks down one of the strangest years in any of our lives, into facts and figures that continue to illustrate the resilience of the U.S. capital markets. Although the report is for fiscal year end September 30, 2020, prior to much of the impact of Covid-19, the Office supplemented the Report with initial Covid-19 impact information.

Background on Office of the Advocate for Small Business Capital Formation

The SEC’s Office of the Advocate for Small Business Capital Formation launched in January 2019 after being created by Congress pursuant to the Small Business Advocate Act of 2016 (see HERE). One of the core tenants of the Office is recognizing that small businesses are job creators, generators of economic opportunity and fundamental to the growth of the country, a drum I often beat.

The Office has the following functions: (i) assist small businesses

May 11, 2021

SPAC Transactions Continue Amid SEC Cautionary Statements

Since I wrote about the SPAC IPO boom in June 2020 (HERE), the trend has not waned. However, as soon as celebrities like Jay-Z, Shaquille O’Neal, A-Rod and astronaut Scott Kelly jumped in, I knew the tide was shifting, and recent SEC alerts bring that to light. To be clear, SPACs have been used as a method for going public for years and will continue to do so in the future. In fact, I firmly believe that going public through a SPAC will continue and should continue to rival the traditional IPO. With so much SPAC money available in the market right now (an estimated $88 billion raised in 2021 so far already exceeding the estimated $83.4 billion raised in all of 2020) and the Dow and S&P beating historical records, SPACs are an excellent option as an IPO alternative.

However, SPACs should not be viewed as the trendy investment of the day and both investors and

April 13, 2021

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Initial Public Offerings (IPOs)

Compliance Deadlines For Nasdaq Board Diversity Rules

Small-Cap IPO Volatility – The China Connection

Final Rules On The Foreign Companies Accountable Act; PCAOB Reached Deal WIth China And Hong Kong – Part III

Final Rules On The Foreign Companies Accountable Act; PCAOB Reached Deal WIth China And Hong Kong – Part II

SEC Proposes New Rules For SPACs – Part 5

SEC Proposes New SPAC Rules – Part 2

SEC Proposes New SPAC Rules – Part 1

Annual Report of Office of Advocate for Small Business Capital Formation

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