On July 24, 2024, the SEC approved an NYSE rule change to allow for the delisting of companies that change their primary business.
NYSE Continued Listing Standards
As I wrote about in October 2023, the NYSE continued listing requirements as set forth in the Listed Company Manual section 802.01 include (pre-rule change) (see HERE):
- Distribution of Capital Stock: (i) total stockholders of 400; or (ii) total stockholders of 1,200 and an average monthly trading volume of less than 100,000 shares; or (iii) total non-affiliated publicly held shares of 600,000.
- Market Value: (i) average global market capitalization of less than $50 mil and stockholders equity is less than $50 mil for 30 consecutive trading days.
- Disposal of Assets – Reduction of Operations: The NYSE will consider a suspension or delisting if: (i) the company has sold or otherwise disposed of its principal operating assets or has ceased to be an operating company or has discontinued a substantial portion of its operations or business for any reason whatsoever; (ii) a bankruptcy or liquidation has been authorized; or (iii) the NYSE receives advise from an authoritative third party that the security has no value.
- Failure to Comply with Listing Agreement and/or SEC Requirements – this is all encompassing as to all NYSE rules (including notice requirements, annual shareholder meetings, soliciting proxies, etc..) and all SEC reporting requirements. Where the deficiency is related to the failure to timely file a report with the SEC, the NYSE will provide prompt notice and the company will be required to engage in discussions with the NYSE. A company will be given a conditional six-month cure period with the potential for an additional six-month cure period. The Exchange will consider all facts and circumstances including, but not limited to, allegations of fraud, the termination or resignation of the company’s independent auditor, resignation of members of the audit committee or other board members, resignation or termination of key officers, and the company filing history.
- Other Events – suspension or delisting can occur where: (i) registration under the Exchange Act is no longer effective; (ii) an entire outstanding call, issue or series of securities is retired through payment, redemption, reclassification, or otherwise; (iii) operations contrary to public interest; (iv) failure to pay listing fees; (v) common stock selling for a substantial period of time at a low price per share and the company does not complete a reverse split after being notified by the Exchange; (v) any components of a unit do not meet the applicable listing requirements; or (vi) non-compliance with executive compensation clawback rules.
The NYSE has now added a requirement related to any company that undertakes a change in its primary business focus. The new paragraph provides that the NYSE may, at its discretion, subject a listed company to immediate suspension and delisting if that listed company has changed its primary business focus to a new area of business that it was not engaged in at the time of its original listing or which was immaterial to its operations at the time of its original listing.
Under the new rule, any company that undertakes a change in its primary business focus must promptly provide notice of such change in writing to the NYSE. The NYSE will then conduct a continued listing analysis and potentially take delisting action. The continued listing analysis will focus on whether the NYSE would have accepted the listed company for initial listing if it had been engaged in its modified business at the time of original listing. Moreover, the analysis will concentrate on the qualitative listing suitability more than the quantitative standards. The NYSE will take into consideration other factors such as any changes in the management, board of directors, voting power, ownership, and financial structure of the company.
Despite the new rule, in its release the NYSE notes that delisting a company as a result of a change in primary business would be an extra-ordinary measure and is not expected to become routine.
The Author
Laura Anthony, Esq.
Founding Partner
Anthony, Linder & Cacomanolis
A Corporate and Securities Law Firm
Securities attorney Laura Anthony and her experienced legal team provide ongoing corporate counsel to small and mid-size private companies, public companies as well as private companies going public on the Nasdaq, NYSE American or over-the-counter market, such as the OTCQB and OTCQX. For more than two decades Anthony, Linder & Cacomanolis, PLLC has served clients providing fast, personalized, cutting-edge legal service. The firm’s reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker-dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions, securities token offerings and initial coin offerings, Regulation A/A+ offerings, as well as registration statements on Forms S-1, S-3, S-8 and merger registrations on Form S-4; compliance with the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers; applications to and compliance with the corporate governance requirements of securities exchanges including Nasdaq and NYSE American; general corporate; and general contract and business transactions. Ms. Anthony and her firm represent both target and acquiring companies in merger and acquisition transactions, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. The ALC legal team assists Pubcos in complying with the requirements of federal and state securities laws and SROs such as FINRA for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the small-cap and middle market’s top source for industry news, and the producer and host of LawCast.com, Corporate Finance in Focus. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.
Ms. Anthony is a member of various professional organizations including the Crowdfunding Professional Association (CfPA), Palm Beach County Bar Association, the Florida Bar Association, the American Bar Association and the ABA committees on Federal Securities Regulations and Private Equity and Venture Capital. She is a supporter of several community charities including the American Red Cross for Palm Beach and Martin Counties, Susan Komen Foundation, Opportunity, Inc., New Hope Charities, the Society of the Four Arts, the Norton Museum of Art, Palm Beach County Zoo Society, the Kravis Center for the Performing Arts and several others.
Ms. Anthony is an honors graduate from Florida State University College of Law and has been practicing law since 1993.
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