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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
clawback rules

Nasdaq and NYSE Clawback Rules

On October 26, 2022, the SEC adopted final rules on listing standards for the recovery of erroneously awarded incentive-based executive compensation (“Clawback Rules”) (see HERE).  The Clawback Rules implement Section 954 of the Dodd-Frank Act and require that national securities exchanges require disclosure of policies regarding and mandating the clawback of compensation under certain circumstances as a listing qualification.

I’ve written about the Clawback Rules a few times, including SEC guidance (see HERE) but have not detailed the final Nasdaq and NYSE rules, until now.

Nasdaq Clawback Rules

Nasdaq listing Rule 5608 sets forth the listing requirements related to the recovery of erroneously awarded compensation.  The language conforms closely to Rule 10D-1 and the SEC release, including explanations on materiality and “litter” restatements that are material based on facts and circumstances and existing judicial and administrative interpretations.

As allowed by Rule 10D-1, the Nasdaq rule provides that a company would not be required to pursue

Read More »

November 5, 2024
API

SEC Adopts New EDGAR Rules

A year after publishing proposed rules, on September 27, 2024, the SEC adopted rule and form amendments to the EDGAR system dubbing the updates as EDGAR Next (for a review of the proposed rules see HERE).   The rule changes are meant to enhance security and improve access to the EDGAR system.  My view is that will accomplish the former and not the latter. The changes require EDGAR filers to authorize identified individuals who are responsible for managing the filers’ EDGAR accounts. Individuals acting on behalf of filers on EDGAR will need individual account credentials to access those EDGAR accounts and make filings.

The new rules amend Rules 10 and 11 of Regulation S-T and amend Form ID.  Only the identified authorized individuals will be able to access a filer’s EDGAR account.  The authorized individual(s) need not be an employee of the filer, but the filer needs to provide a notarized power of attorney to appoint someone.

Through the

Read More »

October 29, 2024
BASDAQ

Foreign Private Issuers – SEC Registration And Reporting And Nasdaq Corporate Governance – Part 3

Although many years ago I wrote a high-level review of foreign private issuer (FPI) registration and ongoing disclosure obligations, I have not drilled down on the subject until now.  While I’m at it, in the multi part blog series, I will cover the Nasdaq corporate governance requirements for listed FPIs.

In Part 1 in this series, I covered the definition of a foreign private issuer (FPI), registration and ongoing reporting requirements – see HERE.  In Part 2 I covered Rules 801 and 802 of the Securities Act, which give FPI’s registration exemptions for rights offerings and exchange offers, respectively – see HERE.  In this Part 3, I discuss the Nasdaq corporate governance requirements for FPIs.

Nasdaq Corporate Governance

In addition to its quantitative listing standards, Nasdaq imposes certain corporate governance and board composition requirements as part of its listing standards.  FPIs, however, are exempt from numerous of these standards and may instead opt to comply with home

Read More »

October 22, 2024
ADRs

Foreign Private Issuers – SEC Registration And Reporting And Nasdaq Corporate Governance – Part 2

Although many years ago I wrote a high-level review of foreign private issuer (FPI) registration and ongoing disclosure obligations, I have not drilled down on the subject until now.  While I’m at it, in the multi part blog series, I will cover the Nasdaq corporate governance requirements for listed FPIs.

In Part 1 in this series, I covered the definition of a foreign private issuer (FPI), registration and ongoing reporting requirements – see HERE.  In this Part 2 I will cover Rules 801 and 802 of the Securities Act, which give FPI’s registration exemptions for rights offerings and exchange offers, respectively.

Rule 801 – Exemption in Connection with Rights Offerings

Rule 801 provides an exemption from registration for certain rights offerings by FPIs.  A “rights offering” is defined for these purposes as the sale for cash of equity securities in which existing securities holders of a particular class (including holders of ADRs) are

Read More »

October 15, 2024
ADRs

Foreign Private Issuers – SEC Registration And Reporting And Nasdaq Corporate Governance – Part 1

Although many years ago I wrote a high-level review of foreign private issuer (FPI) registration and ongoing disclosure obligations, I have not drilled down on the subject until now.  While I’m at it, in the multi part blog series, I will cover the Nasdaq corporate governance requirements for listed FPIs.

Definition of a Foreign Private Issuer

Both the Securities Act of 1933, as amended (“Securities Act”) and the Securities Exchange Act of 1934, as amended (“Exchange Act”) contain definitions of a “foreign private issuer” (“FPI). Generally, if a company does not meet the definition of an FPI, it is subject to the same registration and reporting requirements as any U.S. company.

The determination of FPI status is not just dependent on the country of domicile, though a U.S. company can never qualify regardless of the location of its operations, assets, management and subsidiaries. There are generally two tests of qualification as a foreign private issuer, as follows:

Read More »

October 8, 2024
Foreign private issuers

Related Party Transactions – Foreign Private Issuers

About a year ago, the SEC brought several enforcement proceedings targeting shortcomings in related party transactions disclosures, including by Lyft.  The action provides a reminder that Item 404(a) is broadly construed and reminded me that related party transactions are a topic worthy of blogging about.  Last week I published a blog on related party transaction disclosures for domestic companies (see HERE) and this week covers foreign private issuers (FPIs).

Item 404 of Regulation S-K sets forth the related party disclosure obligations for domestic companies that must be included in various periodic reports and registration statements under the Securities Exchange Act of 1934 (“Exchange Act”) and in registration statements under the Securities Act of 1933 (“Securities Act”).  Foreign private issuers can comply with Item 404 by providing the information required by Item 7.B of Form 20-F plus any additional information required by its home.

Item 7.B of Form 20-F

                General Disclosure

Item 7.B of Form 20-F requires certain disclosure

Read More »

October 1, 2024
clawback rules

Related Party Transactions – Domestic Companies

About a year ago, the SEC brought several enforcement proceedings targeting shortcomings in related party transactions disclosures, including by Lyft.  The action provides a reminder that Item 404(a) is broadly construed to require a description of transactions since the beginning of the registrant’s last fiscal year in excess of $120,000 in which it was or is to be a participant, and in which a related person had or will have a direct or indirect material interest.  When the cases came out, I added related party transactions to my (very long) list of topics worthy of a blog and now is the time.

Item 404 of Regulation S-K sets forth the related party disclosure obligations for domestic companies that must be included in various periodic reports and registration statements under the Securities Exchange Act of 1934 (“Exchange Act”) and in registration statements under the Securities Act of 1933 (“Securities Act”).  Foreign private issuers can comply with Item 404 by providing the

Read More »

September 24, 2024
Abandoned IPO

Terminating Reporting Obligations In An Abandoned IPO

It has been a tough few years for small cap (and all) initial public offerings (IPOs). Although I have been seeing a small up-tick in priced deals recently, we are not yet near the highs of 2020 – 2022. Among the various challenges facing IPO issuers, lengthy Nasdaq/NYSE review periods and trouble building out sufficient allocations have been especially difficult resulting in a lengthier IPO process than expected.
An increased IPO timeline adds significant expense to the process. A registration statement cannot go effective with stale financial statement. Financial statements for domestic issuers go stale every 135 days requiring either a new quarterly review or annual audit and an amended registration statement. Likewise, financial statements for foreign private issuers (FPIs) go stale every nine months. When an issuer is nearing the end date for financial statements, and it appears that a closing of an IPO may be imminent, they sometimes choose to go effective and rely on Rule 430A.

Read More »

September 17, 2024
Delisting

NYSE Approves Change To Delist Companies That Change Primary Business

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
Read More »
September 10, 2024

Categories

Recent News

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...

Nasdaq and NYSE Clawback Rules

November 5, 2024

On October 26, 2022, the SEC adopted final rules on listing standards for the recovery of erroneously awarded incentive-based executive compensation (“Clawback Rules”) (see HERE).  The Clawback Rules implement Section 954 of the Dodd-Frank Act and require that national securities exchanges require disclosure of policies regarding and mandating the clawback of compensation under certain circumstances as a listing qualification.

I’ve written about the Clawback Rules a few times, including SEC guidance (see HERE) but have not detailed the final Nasdaq and NYSE rules, until now.

Nasdaq Clawback Rules

Nasdaq listing Rule 5608 sets forth the listing requirements related to the recovery of erroneously awarded compensation.  The language conforms closely to Rule 10D-1 and the SEC release, including explanations on materiality and “litter” restatements that are material based on facts and circumstances and existing judicial and administrative interpretations.

As allowed by Rule 10D-1, the Nasdaq rule provides that a company would not be required to pursue

Read More »

Read More...

SEC Adopts New EDGAR Rules

October 29, 2024

A year after publishing proposed rules, on September 27, 2024, the SEC adopted rule and form amendments to the EDGAR system dubbing the updates as EDGAR Next (for a review of the proposed rules see HERE).   The rule changes are meant to enhance security and improve access to the EDGAR system.  My view is that will accomplish the former and not the latter. The changes require EDGAR filers to authorize identified individuals who are responsible for managing the filers’ EDGAR accounts. Individuals acting on behalf of filers on EDGAR will need individual account credentials to access those EDGAR accounts and make filings.

The new rules amend Rules 10 and 11 of Regulation S-T and amend Form ID.  Only the identified authorized individuals will be able to access a filer’s EDGAR account.  The authorized individual(s) need not be an employee of the filer, but the filer needs to provide a notarized power of attorney to appoint someone.

Through the

Read More »

Read More...

Foreign Private Issuers – SEC Registration And Reporting And Nasdaq Corporate Governance – Part 3

October 22, 2024

Although many years ago I wrote a high-level review of foreign private issuer (FPI) registration and ongoing disclosure obligations, I have not drilled down on the subject until now.  While I’m at it, in the multi part blog series, I will cover the Nasdaq corporate governance requirements for listed FPIs.

In Part 1 in this series, I covered the definition of a foreign private issuer (FPI), registration and ongoing reporting requirements – see HERE.  In Part 2 I covered Rules 801 and 802 of the Securities Act, which give FPI’s registration exemptions for rights offerings and exchange offers, respectively – see HERE.  In this Part 3, I discuss the Nasdaq corporate governance requirements for FPIs.

Nasdaq Corporate Governance

In addition to its quantitative listing standards, Nasdaq imposes certain corporate governance and board composition requirements as part of its listing standards.  FPIs, however, are exempt from numerous of these standards and may instead opt to comply with home

Read More »

Read More...

Foreign Private Issuers – SEC Registration And Reporting And Nasdaq Corporate Governance – Part 2

October 15, 2024

Although many years ago I wrote a high-level review of foreign private issuer (FPI) registration and ongoing disclosure obligations, I have not drilled down on the subject until now.  While I’m at it, in the multi part blog series, I will cover the Nasdaq corporate governance requirements for listed FPIs.

In Part 1 in this series, I covered the definition of a foreign private issuer (FPI), registration and ongoing reporting requirements – see HERE.  In this Part 2 I will cover Rules 801 and 802 of the Securities Act, which give FPI’s registration exemptions for rights offerings and exchange offers, respectively.

Rule 801 – Exemption in Connection with Rights Offerings

Rule 801 provides an exemption from registration for certain rights offerings by FPIs.  A “rights offering” is defined for these purposes as the sale for cash of equity securities in which existing securities holders of a particular class (including holders of ADRs) are

Read More »

Read More...

Foreign Private Issuers – SEC Registration And Reporting And Nasdaq Corporate Governance – Part 1

October 8, 2024

Although many years ago I wrote a high-level review of foreign private issuer (FPI) registration and ongoing disclosure obligations, I have not drilled down on the subject until now.  While I’m at it, in the multi part blog series, I will cover the Nasdaq corporate governance requirements for listed FPIs.

Definition of a Foreign Private Issuer

Both the Securities Act of 1933, as amended (“Securities Act”) and the Securities Exchange Act of 1934, as amended (“Exchange Act”) contain definitions of a “foreign private issuer” (“FPI). Generally, if a company does not meet the definition of an FPI, it is subject to the same registration and reporting requirements as any U.S. company.

The determination of FPI status is not just dependent on the country of domicile, though a U.S. company can never qualify regardless of the location of its operations, assets, management and subsidiaries. There are generally two tests of qualification as a foreign private issuer, as follows:

Read More »

Read More...

Related Party Transactions – Foreign Private Issuers

October 1, 2024

About a year ago, the SEC brought several enforcement proceedings targeting shortcomings in related party transactions disclosures, including by Lyft.  The action provides a reminder that Item 404(a) is broadly construed and reminded me that related party transactions are a topic worthy of blogging about.  Last week I published a blog on related party transaction disclosures for domestic companies (see HERE) and this week covers foreign private issuers (FPIs).

Item 404 of Regulation S-K sets forth the related party disclosure obligations for domestic companies that must be included in various periodic reports and registration statements under the Securities Exchange Act of 1934 (“Exchange Act”) and in registration statements under the Securities Act of 1933 (“Securities Act”).  Foreign private issuers can comply with Item 404 by providing the information required by Item 7.B of Form 20-F plus any additional information required by its home.

Item 7.B of Form 20-F

                General Disclosure

Item 7.B of Form 20-F requires certain disclosure

Read More »

Read More...

Related Party Transactions – Domestic Companies

September 24, 2024

About a year ago, the SEC brought several enforcement proceedings targeting shortcomings in related party transactions disclosures, including by Lyft.  The action provides a reminder that Item 404(a) is broadly construed to require a description of transactions since the beginning of the registrant’s last fiscal year in excess of $120,000 in which it was or is to be a participant, and in which a related person had or will have a direct or indirect material interest.  When the cases came out, I added related party transactions to my (very long) list of topics worthy of a blog and now is the time.

Item 404 of Regulation S-K sets forth the related party disclosure obligations for domestic companies that must be included in various periodic reports and registration statements under the Securities Exchange Act of 1934 (“Exchange Act”) and in registration statements under the Securities Act of 1933 (“Securities Act”).  Foreign private issuers can comply with Item 404 by providing the

Read More »

Read More...

Terminating Reporting Obligations In An Abandoned IPO

September 17, 2024

It has been a tough few years for small cap (and all) initial public offerings (IPOs). Although I have been seeing a small up-tick in priced deals recently, we are not yet near the highs of 2020 – 2022. Among the various challenges facing IPO issuers, lengthy Nasdaq/NYSE review periods and trouble building out sufficient allocations have been especially difficult resulting in a lengthier IPO process than expected.
An increased IPO timeline adds significant expense to the process. A registration statement cannot go effective with stale financial statement. Financial statements for domestic issuers go stale every 135 days requiring either a new quarterly review or annual audit and an amended registration statement. Likewise, financial statements for foreign private issuers (FPIs) go stale every nine months. When an issuer is nearing the end date for financial statements, and it appears that a closing of an IPO may be imminent, they sometimes choose to go effective and rely on Rule 430A.

Read More »

Read More...

NYSE Approves Change To Delist Companies That Change Primary Business

September 10, 2024

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
Read More »
Read More...
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