On August 22, 2025, Nasdaq proposed a modification to the listing rules to allow delisted SPAC’s to relist in conjunction with a business combination without being subject to the seasoning rule. The amendment will correct a potential unintended consequence of the seasoning rule while giving credence to the investor protections offered by the new SPAC/de-SPAC rules.
Background – Seasoning Rule and New SPAC Rules
Nasdaq, NYSE and NYSE American, all have a listing standard known as the seasoning rule. The seasoning rule is substantially the same for each exchange and provides that (paraphrasing the rule which is written slightly differently for each exchange):
A company that is formed by a reverse merger with a shell company, other than a listed SPAC, will only be eligible to submit an application for initial listing and thereafter qualify to be listed if immediately preceding the filing of the initial listing application the post business combination company:
(i) Has traded for at least one year in the U.S. over-the-counter market, on another national securities exchange, or on a regulated foreign exchange, following the filing with the SEC or Other Regulatory Authority of all required information about the transaction, including audited financial statements for the combined entity (a Super 8-K);
(ii) Timely filed with the SEC all reports since consummation of the reverse merger for a period of one year;
(iii) Filed at least one annual report with a full year audit of the post-closing combined company financial statements; and
(iv) Maintained a closing price equal to the share price requirement applicable to the initial listing standard under which the reverse merger company is qualifying to list for a sustained period of time, but in no event for less than 30 of the most recent 60 trading days prior to approval.
The rule includes an exception for companies that complete a firm commitment offering resulting in net proceeds of at least $40 million.
The purpose of the seasoning rule is to prevent a company from completing a reverse merger with an OTC shell and then immediately apply for an uplisting to a national exchange when they otherwise might not have received market support, such as through an underwriter and capital raise, in an IPO. The seasoning rule ensures that the combined companies have a demonstrated market history, improved reliability of financial results, a stable market price and history of proper corporate governance.
Listed SPACs are exempted from the rule, but following the bursting of the SPAC bubble and adoption of new enhanced disclosure obligations for SPAC and de-SPAC transactions, the time period in which a SPAC completes a business combination has increased. Nasdaq rules generally require that a SPAC complete a business combination (de-SPAC) transaction within 36 months or be delisted. Since adoption of the new SPAC/de-SPAC rules, many SPACs have been temporarily de-listed to the OTC Markets pending completion of their de-SPAC transaction raising the question as to whether these SPACs are subject to the seasoning rule despite otherwise significant de-SPAC transactions and compliance with the new rules.
The new SPAC/de-SPAC rules aligned the disclosures and process associated with a de-SPAC with a traditional IPO providing investor protections akin to the IPO process, including the filing of a registration statement (S-4/F-4) and eliminating the purpose and concerns associated with the seasoning rule. For my 10 part blog series on the SPAC/de-SPAC rules, see HERE; HERE; HERE; HERE; HERE; HERE; HERE; HERE; HERE; and HERE .
Key to whether or not a company is subject to the seasoning rules, is the definition of a reverse merger. Nasdaq currently defines a reverse merger as “any transaction whereby an operating company becomes an Exchange Act reporting company by combining, either directly or indirectly, with a shell company which is an Exchange Act reporting company, whether through a reverse merger, exchange offer, or otherwise. However, a Reverse Merger does not include the acquisition of an operating company by a listed company satisfying the requirements of IM-5101-2 or a business combination described in Rule 5110(a).” IM-5101-2 in turn sets forth the listing requirements for SPACs. Rule 5110(a) requires shareholder approval and a new initial listing application where a listed company, other than a shell, completes a reverse merger resulting in a change of control. For more on the definition of a shell company in a reverse merger, see HERE.
Many of de-listed SPACs have structured their de-SPAC transaction to avoid the definition of a “reverse merger” such that the target in the business combination is the surviving entity, triangular mergers, or other similar legal machinations, to avoid the technical application of the seasoning rule. Understanding the futility of the rule to these de-SPAC transactions, Nasdaq has rightfully accepted form over substance structures allowing these companies to re-list upon completing a business combination.
Separately, Nasdaq listing rules require that a company that is uplisting from OTC Markets maintain a minimum average daily trading volume of 2,000 shares over the 30 day trading period prior to listing (the “ADV Requirement”). OTC companies do not need to meet the ADV Requirement if they are completing a listing in conjunction with a firm commitment underwritten offering of at least $5 million. As SPACs are thinly traded prior to a business combination and business combinations rarely include firm commitment offerings, many de-listed SPACs have faced challenges meeting the ADV Requirement.
Proposed New Rule
Nasdaq is proposing to modify the definition of a “reverse merger” to exclude any SPAC that is listing in connection with a de-SPAC transaction upon effectiveness of a registration statement (i.e. S-4/F-4). Nasdaq is also proposing to modify the ADV Requirement listing rules to exclude company’s listing in connection with a de-SPAC transaction upon effectiveness of a registration statement (i.e. S-4/F-4). The effect of these changes will be to treat a de-SPAC transaction by a SPAC trading in the OTC market in the same way as a de-SPAC transaction with a listed SPAC.
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.
Contact Anthony, Linder & Cacomanolis, PLLC. Inquiries of a technical nature are always encouraged.
Follow Anthony, Linder & Cacomanolis, PLLC on Facebook, LinkedIn, YouTube, Pinterest and Twitter.
Anthony, Linder & Cacomanolis, PLLC makes this general information available for educational purposes only. The information is general in nature and does not constitute legal advice. Furthermore, the use of this information, and the sending or receipt of this information, does not create or constitute an attorney-client relationship between us. Therefore, your communication with us via this information in any form will not be considered as privileged or confidential.
© Anthony, Linder & Cacomanolis, PLLC
