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Capital Markets

NASDAQ Proposes Amendment To Liquidity Listing Standard

On December 12, 2024, Nasdaq proposed an amendment to its liquidity listing standards for the Nasdaq Capital Market and Nasdaq Global Market such that the market value of unrestricted publicly held shares requirement could only be satisfied from the proceeds of the initial public offering.  That is, Nasdaq would no longer count shares registered for re-sale by existing shareholders towards satisfying this listing standard.  Nasdaq is also proposing to make similar changes affecting companies the uplist onto the Nasdaq from OTC Markets.

To list its securities on Nasdaq Capital Market or Nasdaq Global Market, a company is required to meet: (a) certain initial quantitative and qualitative requirements and (b) certain continuing quantitative and qualitative requirements.  The quantitative listing thresholds for initial listing are generally higher than for continued listing, thus helping to ensure that companies have reached a sufficient level of maturity prior to listing.  NASDAQ also requires listed companies to meet stringent corporate governance standards.

Listing

Read More »

January 14, 2025
BOI Reporting Company

Court Issues Nationwide Injunction on Corporate Transparency Act

On December 3, 2024, in what was not at all surprising, a Texas court issued a preliminary injunction blocking enforcement and staying the compliance date of the Corporate Transparency Act (CTA).   The Court found that the CTA is unconstitutional as outside of Congress’s power.

A full discussion of the CTA is included below.  The Texas court found that the CTA represents a federal attempt to monitor companies created under state law and eliminates the corporate anonymity feature designed by states charged with regulating corporate formation – both in violation of the U.S. Constitution and its explicit separation of powers.

The court’s opinion is strongly written, determining that the government could not justify the constitutionality of the law, regardless of every attempt.  In particular, the Plaintiff’s contend that CTA violates: (i) the Ninth and Tenth Amendments by intruding on State’s rights; (ii) the First Amendment by compelling speech and burdening individuals’ rights of association; and (iii) the Fourth Amendment by

Read More »

January 7, 2025
Form F-4

Registration Statement Undertakings

Every four years we go through a regulatory dead zone as the SEC prepares for a change in administration with new priorities, new interpretations, and a whole new rulemaking agenda, including the potential unwinding of the prior administration’s rules.  While waiting for the significant changes to come, I’ll continue to dive into the endless detailed topics of disclosure and other requirements of the federal securities laws.  This week I’ll cover the ongoing requirements associated with an effective registration statement – known as “Undertakings.”

Every registration statement filed pursuant to the Securities Act of 1933 (“Securities Act”), whether by a domestic company or foreign private issuer (“FPI”) requires the registrant to include a statement as to certain affirmative undertakings by such company.  Item 512 of Regulation S-K sets forth the undertakings, and registration statements on Forms S-1, S-3, F-1 and F-3 must include all items set forth in Item 512.  Registration Statements on Form S-8 need only include the undertakings in

Read More »

December 31, 2024
Internet Availability of Proxy Materials

Internet Availability of Proxy Materials

A few weeks ago, I wrote about shareholder meeting timelines, which included a brief discussion as to how a company can increase, or decrease, a meeting timeline by delivering proxy materials by making them available on the internet – see HERE.  This week I am going to drill down on Rule 14a-16 including disclosure obligation and technical requirements for utilizing “Internet Availability of Proxy Materials.”

Rule 14a-16 – Internet Availability of Proxy Materials             

Rule 14a-16 governs a company’s ability to make proxy materials available over the internet, as opposed to printing and mailing, which can be expensive and time consuming.  Rule 14a-16 provides that when a company is making proxy materials available over the internet, it must mail a notice to all security holders a minimum of 40 calendar days before the meeting, or if there is no meeting, before the consents or authorizations may be used to affect the consented upon corporate action.

Companies may not

Read More »

December 24, 2024
Alternative Board Diversity Matrix format

Court Overrules Nasdaq Board Diversity Rule

The court has come to the rescue once again!  On December 11, 2024, the 5th Circuit held that the SEC exceeded its authority in approving Nasdaq’s board diversity rule finding the rule was far removed from the purposes of the Securities Exchange Act’s regulatory regime.  Rumor has it that the Nasdaq does not intend to appeal, meaning the board diversity rule may be DOA.

Background

On August 6, 2021, the SEC approved Nasdaq’s board diversity listing standards proposal adding new listing Rule 5606(a) (see HERE).

Nasdaq Rule 5606(a) requires Nasdaq listed companies to publicly disclose, in an aggregated form, to the extent permitted by law (for example, some foreign countries may prohibit such disclosure), information on the voluntary self-identified gender and racial characteristics and LGBTQ+ status of the company’s board of directors as part of the ongoing corporate governance listing requirements.  Each company must provide an annual Board Diversity Matrix disclosure, including: (i) the total number of directors;

Read More »

December 17, 2024
Blockchain

Court Strikes Down Recent Changes To Definition Of A Dealer

In a big win for hedge funds and the crypto industry, on November 21, 2024, a Texas federal judge overturned the recent SEC rule that expanded the definition of “dealer” under the Exchange Act.  For a review of the final rule see HERE.

The amendments were intended to require certain proprietary or principal traders and liquidity providers to register as either a dealer or government securities dealer as applicable.  The rules amended Exchange Act Rules 5a5-4 and 3a44-2 to enhance the definition of “as part of a regular business” in Sections 3(a)(5) and 3(a)(44) of the Exchange Act.

In a legal challenge, the Crypto Freedom Alliance of Texas and Blockchain Association sued the SEC claiming that the rule amendments radically expanded the definition of a “dealer” in a way that could encompass digital asset industry participants (and hedge funds) that do not engage in any conduct resembling “dealing” as that term has ever been

Read More »

December 10, 2024
14c Information Statement

Understanding the Shareholder Meeting Timeline

Proxy season is fast approaching.  Whether it is for an annual meeting or special shareholder meeting, clients are always asking how quickly they can schedule a shareholder meeting, or where action is taken by consent, how quickly the company can effectuate such consented upon action.  The answer depends on several factors, including whether the meeting is a special or annual meeting, if annual, whether there are any “non-routine” items on the agenda, and whether the company intends to mail out all proxy materials or just a notice of internet availability of such materials.  Although I have written about the proxy rules many times, this is the first blog where I drill down and focus on the timeline.

The federal proxy rules can be found in Section 14 of the Securities Exchange Act of 1934 (“Exchange Act”) and the rules promulgated thereunder.  The rules apply to any company which has securities registered under Section 12 of the Exchange Act. Section 14

Read More »

December 3, 2024
GAAP

Introducing The OTCID

OTC Markets has announced the launch of a new market tier.  Effective July 2025, Pink Current will become the OTCID, a basic reporting market requiring companies to meet minimal current information disclosures and provide management certifications.  OTC Markets will still maintain the Pink Limited and Expert Market tiers for companies that do not qualify for the OTCID.  OTC Markets has not yet published all of the requirements for the OTCID, but I suspect they will be similar to the existing Pink Current, with the addition of the management certifications.

I support the change and new branding opportunity.  OTC Markets have struggled in recent years, primarily as a result of an inability for OTC Markets traded companies to obtain institutional financing or underwriter/placement agent banker support.  Forever the optimist, the change could be just what is needed to revitalize the OTC Markets as a venture market place for U.S. micro-cap companies.

OTCID

Currently, the OTC Markets divides issuers into

Read More »

November 26, 2024
Delisting Process

Nasdaq Amends Bid Price Compliance Rules to Accelerate Delisting Process

On October 7, 2024 the SEC approved amendments to Nasdaq Rule 5810(c)(3)(A) to allow for an accelerated delisting process where a listed company uses a reverse split to regain compliance with the bid price requirement for continued listing, but that as a result of the reverse split, the company falls below other listing standards, such as the minimum number of round lot holders, or minimum number of shares in the publicly held float.  This new rule is separate from another pending rule change that would accelerate the delisting process for companies that fail to regain compliance with the minimum bid price requirements following a second compliance period and for securities that have had a reverse stock split over the prior one-year period.

These rule changes follow other recent rule changes meant to reduce the number of ultra micro-cap companies trading on the national exchange and tighten up compliance for those that do meet the standards.  In March 2024, Nasdaq amended

Read More »

November 19, 2024
IPO

Market Wrap-Up

For the first time since December 2022, the markets are seeing an uptick in completed small cap initial public offerings (IPOs).  My clients are always asking me about the deals that are getting done, which prompted this blog, the first in what will be regular periodic market roundups.

Nineteen small cap (under $25,000,000) IPOs priced in October compared to 12 in September; 8 in August; 8 in July; 3 in June; 5 in May; 12 in April; 6 in March; 6 in February; and 8 in January.  Below is a chart of relevant deal information for the 19 October IPOs.    Normally, I would include all deals under $50,000,000 in this category, but the deal sizes remain very low.  As deal sizes return to pre 2022 normal levels, I will adjust by market recaps upward accordingly.

Exchange Offer Amount Domestic/Foreign Issuer Banker(s)
Nasdaq Capital $4,199,995 Foreign Aegis Capital Corp.
Nasdaq Capital $5,200,000 Foreign The Benchmark Company
Nasdaq Capital $7,000,000
Read More »
November 12, 2024

Categories

Recent News

NASDAQ Proposes Amendment To Liquidity Listing Standard

January 14, 2025

On December 12, 2024, Nasdaq proposed an amendment to its liquidity listing standards for the Nasdaq Capital Market and Nasdaq Global Market such that the market value of unrestricted publicly held shares requirement could only be satisfied from the proceeds of the initial public offering.  That is, Nasdaq would no longer count shares registered for re-sale by existing shareholders towards satisfying this listing standard.  Nasdaq is also proposing to make similar changes affecting companies the uplist onto the Nasdaq from OTC Markets.

To list its securities on Nasdaq Capital Market or Nasdaq Global Market, a company is required to meet: (a) certain initial quantitative and qualitative requirements and (b) certain continuing quantitative and qualitative requirements.  The quantitative listing thresholds for initial listing are generally higher than for continued listing, thus helping to ensure that companies have reached a sufficient level of maturity prior to listing.  NASDAQ also requires listed companies to meet stringent corporate governance standards.

Listing

Read More »

Read More...

Court Issues Nationwide Injunction on Corporate Transparency Act

January 7, 2025

On December 3, 2024, in what was not at all surprising, a Texas court issued a preliminary injunction blocking enforcement and staying the compliance date of the Corporate Transparency Act (CTA).   The Court found that the CTA is unconstitutional as outside of Congress’s power.

A full discussion of the CTA is included below.  The Texas court found that the CTA represents a federal attempt to monitor companies created under state law and eliminates the corporate anonymity feature designed by states charged with regulating corporate formation – both in violation of the U.S. Constitution and its explicit separation of powers.

The court’s opinion is strongly written, determining that the government could not justify the constitutionality of the law, regardless of every attempt.  In particular, the Plaintiff’s contend that CTA violates: (i) the Ninth and Tenth Amendments by intruding on State’s rights; (ii) the First Amendment by compelling speech and burdening individuals’ rights of association; and (iii) the Fourth Amendment by

Read More »

Read More...

Registration Statement Undertakings

December 31, 2024

Every four years we go through a regulatory dead zone as the SEC prepares for a change in administration with new priorities, new interpretations, and a whole new rulemaking agenda, including the potential unwinding of the prior administration’s rules.  While waiting for the significant changes to come, I’ll continue to dive into the endless detailed topics of disclosure and other requirements of the federal securities laws.  This week I’ll cover the ongoing requirements associated with an effective registration statement – known as “Undertakings.”

Every registration statement filed pursuant to the Securities Act of 1933 (“Securities Act”), whether by a domestic company or foreign private issuer (“FPI”) requires the registrant to include a statement as to certain affirmative undertakings by such company.  Item 512 of Regulation S-K sets forth the undertakings, and registration statements on Forms S-1, S-3, F-1 and F-3 must include all items set forth in Item 512.  Registration Statements on Form S-8 need only include the undertakings in

Read More »

Read More...

Internet Availability of Proxy Materials

December 24, 2024

A few weeks ago, I wrote about shareholder meeting timelines, which included a brief discussion as to how a company can increase, or decrease, a meeting timeline by delivering proxy materials by making them available on the internet – see HERE.  This week I am going to drill down on Rule 14a-16 including disclosure obligation and technical requirements for utilizing “Internet Availability of Proxy Materials.”

Rule 14a-16 – Internet Availability of Proxy Materials             

Rule 14a-16 governs a company’s ability to make proxy materials available over the internet, as opposed to printing and mailing, which can be expensive and time consuming.  Rule 14a-16 provides that when a company is making proxy materials available over the internet, it must mail a notice to all security holders a minimum of 40 calendar days before the meeting, or if there is no meeting, before the consents or authorizations may be used to affect the consented upon corporate action.

Companies may not

Read More »

Read More...

Court Overrules Nasdaq Board Diversity Rule

December 17, 2024

The court has come to the rescue once again!  On December 11, 2024, the 5th Circuit held that the SEC exceeded its authority in approving Nasdaq’s board diversity rule finding the rule was far removed from the purposes of the Securities Exchange Act’s regulatory regime.  Rumor has it that the Nasdaq does not intend to appeal, meaning the board diversity rule may be DOA.

Background

On August 6, 2021, the SEC approved Nasdaq’s board diversity listing standards proposal adding new listing Rule 5606(a) (see HERE).

Nasdaq Rule 5606(a) requires Nasdaq listed companies to publicly disclose, in an aggregated form, to the extent permitted by law (for example, some foreign countries may prohibit such disclosure), information on the voluntary self-identified gender and racial characteristics and LGBTQ+ status of the company’s board of directors as part of the ongoing corporate governance listing requirements.  Each company must provide an annual Board Diversity Matrix disclosure, including: (i) the total number of directors;

Read More »

Read More...

Court Strikes Down Recent Changes To Definition Of A Dealer

December 10, 2024

In a big win for hedge funds and the crypto industry, on November 21, 2024, a Texas federal judge overturned the recent SEC rule that expanded the definition of “dealer” under the Exchange Act.  For a review of the final rule see HERE.

The amendments were intended to require certain proprietary or principal traders and liquidity providers to register as either a dealer or government securities dealer as applicable.  The rules amended Exchange Act Rules 5a5-4 and 3a44-2 to enhance the definition of “as part of a regular business” in Sections 3(a)(5) and 3(a)(44) of the Exchange Act.

In a legal challenge, the Crypto Freedom Alliance of Texas and Blockchain Association sued the SEC claiming that the rule amendments radically expanded the definition of a “dealer” in a way that could encompass digital asset industry participants (and hedge funds) that do not engage in any conduct resembling “dealing” as that term has ever been

Read More »

Read More...

Understanding the Shareholder Meeting Timeline

December 3, 2024

Proxy season is fast approaching.  Whether it is for an annual meeting or special shareholder meeting, clients are always asking how quickly they can schedule a shareholder meeting, or where action is taken by consent, how quickly the company can effectuate such consented upon action.  The answer depends on several factors, including whether the meeting is a special or annual meeting, if annual, whether there are any “non-routine” items on the agenda, and whether the company intends to mail out all proxy materials or just a notice of internet availability of such materials.  Although I have written about the proxy rules many times, this is the first blog where I drill down and focus on the timeline.

The federal proxy rules can be found in Section 14 of the Securities Exchange Act of 1934 (“Exchange Act”) and the rules promulgated thereunder.  The rules apply to any company which has securities registered under Section 12 of the Exchange Act. Section 14

Read More »

Read More...

Introducing The OTCID

November 26, 2024

OTC Markets has announced the launch of a new market tier.  Effective July 2025, Pink Current will become the OTCID, a basic reporting market requiring companies to meet minimal current information disclosures and provide management certifications.  OTC Markets will still maintain the Pink Limited and Expert Market tiers for companies that do not qualify for the OTCID.  OTC Markets has not yet published all of the requirements for the OTCID, but I suspect they will be similar to the existing Pink Current, with the addition of the management certifications.

I support the change and new branding opportunity.  OTC Markets have struggled in recent years, primarily as a result of an inability for OTC Markets traded companies to obtain institutional financing or underwriter/placement agent banker support.  Forever the optimist, the change could be just what is needed to revitalize the OTC Markets as a venture market place for U.S. micro-cap companies.

OTCID

Currently, the OTC Markets divides issuers into

Read More »

Read More...

Nasdaq Amends Bid Price Compliance Rules to Accelerate Delisting Process

November 19, 2024

On October 7, 2024 the SEC approved amendments to Nasdaq Rule 5810(c)(3)(A) to allow for an accelerated delisting process where a listed company uses a reverse split to regain compliance with the bid price requirement for continued listing, but that as a result of the reverse split, the company falls below other listing standards, such as the minimum number of round lot holders, or minimum number of shares in the publicly held float.  This new rule is separate from another pending rule change that would accelerate the delisting process for companies that fail to regain compliance with the minimum bid price requirements following a second compliance period and for securities that have had a reverse stock split over the prior one-year period.

These rule changes follow other recent rule changes meant to reduce the number of ultra micro-cap companies trading on the national exchange and tighten up compliance for those that do meet the standards.  In March 2024, Nasdaq amended

Read More »

Read More...

Market Wrap-Up

November 12, 2024

For the first time since December 2022, the markets are seeing an uptick in completed small cap initial public offerings (IPOs).  My clients are always asking me about the deals that are getting done, which prompted this blog, the first in what will be regular periodic market roundups.

Nineteen small cap (under $25,000,000) IPOs priced in October compared to 12 in September; 8 in August; 8 in July; 3 in June; 5 in May; 12 in April; 6 in March; 6 in February; and 8 in January.  Below is a chart of relevant deal information for the 19 October IPOs.    Normally, I would include all deals under $50,000,000 in this category, but the deal sizes remain very low.  As deal sizes return to pre 2022 normal levels, I will adjust by market recaps upward accordingly.

Exchange Offer Amount Domestic/Foreign Issuer Banker(s)
Nasdaq Capital $4,199,995 Foreign Aegis Capital Corp.
Nasdaq Capital $5,200,000 Foreign The Benchmark Company
Nasdaq Capital $7,000,000
Read More »
Read More...
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