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ナスダック、1株あたり0.10ドル銘柄の上場廃止の加速を提案

ナスダックは、同取引所で取引される低価格銘柄の数を減らすための継続的な取り組みの一環として、株価が0.10ドルを下回る銘柄の上場廃止手続きを迅速化することを目的に、最低入札価格規則の改正を提案しました。特に、ナスダックは、株価が10営業日連続で終値ベースで0.10ドル以下となった銘柄(以下「低価格銘柄」)について、企業がその他の入札価格要件を満たしているかどうかにかかわらず、当該銘柄に対して上場廃止通知を発行し、その取引を停止することを規定する規則5810条および5815条の改正を提案しています。

これは、2回目のコンプライアンス期間終了後も最低入札価格要件への適合を回復できなかった企業や、過去1年間に株式併合を実施した証券の上場廃止プロセスを迅速化する最近の規則改正に続くものです(参照)。ナスダックはこれに先立ち、最低入札価格を満たすために株式併合を利用することを制限する規則改正も実施しました。これは、株式併合によって最低ラウンドロット保有者数や公開流通株式数など、ナスダックの他の上場基準に違反する結果となる場合、そのような株式併合の利用を制限する内容です(参照)。  

背景

約1年前、私はナスダック上場における不備通知および上場廃止手続きの詳細を解説した3部構成のブログシリーズを執筆しました。参照, 参照 , 参照 をご覧ください。同ブログシリーズで解説したように、不備通知には3つの種類があります。(i) 即時上場廃止の決定につながる不備、(ii) ナスダックの審査のためにコンプライアンス計画を提出できる不備、(iii) 自動的な是正または遵守期間が与えられる不備です。

ナスダックの上場要件では、株式証券の**終値買気配価格(bid price)**は1株あたり1.00ドル以上を維持することが求められています。この要件は、ナスダック・キャピタル・マーケッツについてはルール5550、ナスダック・グローバルおよびグローバル・セレクト・マーケッツについてはルール5450に規定されています。企業が買気配価格要件を満たさないと判断されるには、その証券の取引価格が30営業日連続して1.00ドルを下回っている必要があります。

買気配価格の不備には、自動的な是正期間が設けられています。特に、規則5810は、「最低買気配価格の継続上場要件を満たしていないと判断されるのは、その不備が30営業日連続して継続した場合のみとする。当該不備があった場合、会社は速やかに通知を受け、当該通知から180暦日以内に適合を回復しなければならない。規則5810(c)(3)(H)に規定されているように、スタッフが裁量によりこの10営業日要件を延長しない限り、適用される適合期間中に少なくとも10営業日連続して適用基準を満たすことで、適合を達成することができる。」と規定している。

一般的に、企業は、最初のコンプライアンス期間(180日間)の最終日において、公開株式の時価総額に関する継続上場要件および入札価格要件を除くすべての適用初回上場要件を満たしている場合、追加の180日間のコンプライアンス期間を申請することができます。また、企業は、通常は株式併合を通じて是正を行う意向をナスダックに明示的に通知する必要があります。なお、企業が(例えば決算発表などで)適用される上場基準を満たしていないことを示す情報を公表している場合、追加のコンプライアンス期間を申請する資格はありません。

規則5810は次のように続きます。「前述にかかわらず、企業がコンプライアンス達成のために措置を講じ、その結果、当該企業の証券が他の上場要件の数値基準を下回った場合、当該他の上場要件に適用されるコンプライアンス期間の有無にかかわらず、当該企業は入札価格要件への適合を回復したものとはみなされない。このような場合、企業は以下の両方の条件を満たすまで非適合と見なされる。(i) その他の不備が是正されること、及び (ii) その後、企業が最低10営業日連続で入札価格基準を満たすこと。ただし、規則5810(c)(3)(H)に規定されているとおり、スタッフが裁量によりこの10営業日の期間を延長しない限り。企業が当初の入札価格不備に適用されるコンプライアンス期間内に(i)および(ii)の遵守を示さない場合、ナスダックはスタッフによる上場廃止決定通知書を発行する。」

ナスダックは、特定の状況下において、入札価格要件に関する非適合について、適用されるコンプライアンス期間を設けずに上場廃止手続きを迅速化することも認めています。ナスダック規則5810および5815は、以下のいずれかに該当する場合には、通常のコンプライアンス期間の有無にかかわらず、ナスダックが上場廃止決定を行うことができると規定しています。(i) 企業の証券の終値買気配が10営業日連続で0.10ドル以下となった場合(「低価格銘柄」)、(ii) 企業が入札価格要件を満たしておらず、過去2年間に累計で250株以上を1株にまとめる株式併合を1回以上実施している場合、(iii) 上場企業が継続上場のための入札価格要件を満たす目的で株式併合などの措置を講じた結果、最低ラウンドロット保有者数や公開流通株式数など、他の上場基準を下回ることとなった場合、または (iv) 企業が入札価格要件を満たしておらず、過去1年間に株式併合を実施している場合です。

提案された改正案 – 低価格銘

前述の「低価格株」と呼ばれる銘柄について、ナスダックは、企業の証券の終値が10営業日連続で0.10ドル以下となった場合、即時に上場廃止を決定する権限を有しています。現行の規定では、低価格株として上場廃止の対象となるためには、まず企業が入札価格要件に適合していない(すなわち、終値が30営業日連続で1.00ドルを下回っている)必要があります。今回の改正案では、過去30日間に株価が1.00ドルを上回る取引があった場合でも、10営業日連続で0.10ドルを下回って取引されている銘柄について、ナスダックが上場廃止を決定できるようになります。この改正により、株価が1.00ドル超から0.10ドル未満に急落した場合、上場廃止決定の通知が発行されるまでの期間が短縮されることになります。

さらに、提案されている規則5815の改正により、ナスダックは、上場廃止決定後の聴聞会パネルによる審査手続中であっても、当該企業の株式のナスダック市場での取引を直ちに停止できるようになります。具体的には、ナスダックは上場規則5815(a)(1)(B)(ii)eを新設し、通常は聴聞会の適時な請求があった場合、パネルによる書面決定が出るまで取引停止および上場廃止措置が一時的に保留されるという一般規定にかかわらず、低価格要件に違反した企業による請求に関する事項については、聴聞会の請求によっても取引停止の効力は停止されないと定めることを提案しています。言い換えれば、当該企業の株式は、当該審査手続中はOTCマーケットで取引されることになります。

さらに、この規則改正により、企業は最低10営業日連続で1.00ドルを超える取引を行うことで、低価格要件を再び遵守できることが明確化されます。ナスダックの審問委員会は、企業が適用されるすべての上場基準を遵守していると判断し、ナスダックでの取引を再開する権限を有します。

著者

ローラ・アンソニー弁護士

設立パートナー

アンソニー、リンダー&カコマノリス

企業法務および証券法務事務所

LAnthony@ALClaw.com

証券弁護士ローラ・アンソニー氏とその経験豊富な法律チームは、中小規模の非公開企業、上場企業、そして上場予定の非公開企業に対して継続的な企業顧問サービスを提供しています。ナスダックNYSEアメリカン、または店頭市場(例えばOTCQBOTCQX)で上場を目指す企業も対象です。20年以上にわたり、Anthony, Linder & Cacomanolis, PLLC(ALC)は、迅速でパーソナライズされた最先端の法的サービスをクライアントに提供してきました。当事務所の評判と人脈は、投資銀行、証券会社、機関投資家、その他の戦略的提携先への紹介など、クライアントにとって非常に貴重なリソースとなっています。当事務所の専門分野には、1933年証券法の募集・販売および登録要件の遵守(レギュレーションDおよびレギュレーションSに基づく私募取引、PIPE取引、証券トークン・オファリング、イニシャル・コイン・オファリングを含む)が含まれますが、これに限定されません。規制A/A+オファリング、S-1、S-3、S-8フォームの登録申請、S-4フォームによる合併登録、1934年証券取引法の遵守(フォーム10による登録、フォーム10-Q、10-K、8-Kおよび14C情報・14A委任状報告書)、あらゆる形態の株式公開取引、合併・買収(リバースマージャーおよびフォワードマージャーを含む)、ナスダックNYSEアメリカンを含む証券取引所のコーポレートガバナンス要件への申請および遵守、一般企業取引、一般契約および事業取引が含まれます。アンソニー氏と当事務所は、合併・買収取引において、買収対象企業と買収企業の双方を代理し、合併契約、株式交換契約、株式購入契約、資産購入契約、組織再編契約などの取引文書を作成します。ALC法務チームは、公開企業が連邦および州の証券法やSROs要件に準拠することを支援しており、15c2-11申請、社名変更、リバース・フォワードスプリット、本拠地変更などにも対応しています。アンソニー氏はまた、中堅・中小企業向けの業界ニュースのトップ情報源であるSecuritiesLawBlog.comの著者であり、企業財務に特化したポッドキャスト『LawCast.com: Corporate Finance in Focus』のプロデューサー兼ホストでもあります。当事務所は、ニューヨーク、ロサンゼルス、マイアミ、ボカラトン、ウェストパームビーチ、アトランタ、フェニックス、スコッツデール、シャーロット、シンシナティ、クリーブランド、ワシントンD.C.、デンバー、タンパ、デトロイト、ダラスなど、多くの主要都市でクライアントを代理しています。

アンソニー氏は、Crowdfunding Professional Association(CfPA)、パームビーチ郡弁護士会、フロリダ州弁護士会、アメリカ弁護士会(ABA)および連邦証券規制やプライベート・エクイティ・ベンチャーキャピタルに関するABA委員会など、さまざまな専門団体のメンバーです。パームビーチ郡およびマーティン郡のアメリカ赤十字社、スーザン・コーメン財団、オポチュニティ社(Opportunity, Inc.)、ニュー・ホープ・チャリティーズ、フォー・アーツ協会(Society of the Four Arts)、ノートン美術館、パームビーチ郡動物園協会、クラヴィス・パフォーミング・アーツ・センターなど、複数の地域社会慈善団体を支援しています。

アンソニー氏はフロリダ州立大学ロースクールを優秀な成績で卒業しており、1993年から弁護士として活動しています。

Anthony, Linder & Cacomanolis, PLLC にお問い合わせください。技術的な内容に関するご質問もいつでも歓迎いたします。

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Anthony, Linder & Cacomanolis, PLLCは、本情報を教育目的の一般情報として提供しています。本情報は一般的な内容であり、法的助言を構成するものではありません。さらに、本情報の利用や送受信は、当事務所との弁護士–依頼者関係を成立させるものではありません。したがって、本情報を通じて当事務所と行ういかなる通信も、特権または機密として扱われることはありません。

© Anthony, Linder & Cacomanolis, PLLC

 

 

 

Nasdaq Proposes To Accelerate The Delisting Of $0.10 Stocks

On September 3, 2025, Nasdaq proposed amendments to accelerate the suspension and delisting of a company that falls below any of the numeric listing requirements, including the bid price, market value of public float, equity, income and total assets/revenue requirements, and that has a Market Value of Listed Securities (“MVLS”) below $5 million.  On the same day, Nasdaq proposed amendments to its liquidity listing standards for the Nasdaq Capital Market and Nasdaq Global Market to increase the minimum Market Value of Unrestricted Publicly Held Shares (“MVUPHS”) requirement for those companies listing under the net income standard from $5 million to $15 million (see HERE).

This follows a series of final and proposed rule amendments increasing liquidity standards and accelerating delisting processes for small cap listed companies including: (i) an April rule amendment requiring that MVUPHS can only be satisfied through IPO proceeds and that shares registered for resale may no longer be counted (see HERE); (ii) a recent

ナスダック、純利益上場基準に基づく流動性要件の引き上げを提案

202593日、ナスダックは、ナスダック・キャピタル・マーケットおよびナスダック・グローバル・マーケットの流動性上場基準を改正する案を提案しました。この改正案では、純利益基準で上場する企業に求められる**「未制限公開株式時価総額(MVUPHS)」**の最低要件を5百万ドルから1,500万ドルに引き上げることが含まれています。これは、4月に行われた規則改正(MVUPHSIPOによる調達金額のみで満たすことができ、再販用に登録された株式は計上できなくなることを規定)に続くものです(参考:HERE)。今回の提案により、小型株企業がナスダックIPOを実施することはさらに難しくなるとともに、純利益基準を利用して上場することの唯一の実質的な利点や区別が失われることになります。

背景

ナスダックに上場するには、企業は(a) 一定の初期定量的・定性的な要件、および(b) 一定の継続的定量的・定性的な要件を満たす必要があります。新規上場における定量的な上場基準は、通常、継続上場における基準よりも高く設定されており、上場前に企業が十分な成熟度に達していることを保証するのに役立ちます。  

ナスダックの各階層では、企業が満たすべき上場基準として、自己資本基準、上場証券の時価基準、純利益基準の3つの異なる基準が設けられています。ナスダックはこれらの上場基準を策定するにあたり、営業実績のある企業、上場証券の時価総額が高い企業、あるいは純利益を生み出している企業には、異なる基準に基づいて資本市場へのアクセス機会を与えるべきだと判断したと考えられます。このブログの最後に、ナスダック・キャピタル・マーケッツの定量的な上場基準の表を掲載しました。  

ナスダック・グローバル・マーケットに新規上場するには、企業は以下の最低MVUPHS(未制限公開株式時価総額)要件を満たす必要があります。純利益基準では8百万ドル、自己資本基準では18百万ドル、上場証券の時価総額基準または総資産/総収益基準のいずれかでは20百万ドルです。一方、ナスダック・キャピタル・マーケットに新規上場する場合、企業は純利益基準で5百万ドル、自己資本基準または上場証券の時価総額基準のいずれかで15百万ドルのMVUPHSを満たす必要があります。MVUPHS基準の設定にあたり、ナスダックの目的は、十分な流動性を確保し、価格発見や活発な取引を可能にすることにあります。  

規則改正

ナスダックは、純利益基準に基づいて上場を目指す企業に対し、ナスダック・グローバル・マーケットおよびナスダック・キャピタル・マーケットのMVUPHS1,500万ドルに引き上げるため、規則5405および5505の改正を提案しています。

予想通り、4月に実施された規則改正により、再販登録された株式をMVUPHSの一部として計上できなくなったことを受けて、ナスダックでは純利益基準に基づいて上場を目指す企業が増加しています。ナスダックの規則発表では、「ナスダック・キャピタル・マーケットおよびグローバル・マーケットで、それぞれMVUPHSがわずか500万ドルまたは800万ドルの企業が、価格発見を支える取引を行わない可能性があることを懸念している」と示されています。さらに、初回上場基準の設定理由にかかわらず、ナスダックは現在、「企業が最低限の純利益を有するという理由だけで、自己資本や時価総額に比べて著しく低い流動性基準を求めることは適切ではない」と考えています。

ナスダックは、この件に関して他の説明や議論を行っておらず、今回の規則改正が実質的に純利益基準による上場をなくすことになるという点も認めていません  

現行の上場基準

ナスダック・キャピタル・マーケットの定量的上場基準:

要件 自己資本基   上場証券の時価総額基準 純利益基準
上場規則 5505(a) および

5505(b)(1)

5505(a) および

5505(b)(2)

5505(a) および

5505(b)(3)

株主資本  500万ドル 400万ドル  400万ドル 
未制限公開株式の時価総額 ** 1,500万ドル 1,500万ドル  500万ドル 
営業実績 2年間 該当なし 該当なし
上場証券の時価総額 該当なし 5,000万ドル* 該当なし
継続事業からの純利益(直近事業年度または過去3事業年度のうち2年度) 該当なし 該当なし 75万ドル 
未制限公開株式 100万株 100万株 100万株
最低売値また

は終値 ***

4ドル

3ドル

4ドル

2ドル

4ドル

3ドル

コーポレートガバナンス あり  あり   あり  
未制限の単元株主 **** 300 300 300
Read More »

Nasdaq Proposes To Increase Liquidity Requirements Under Net Income Listing Standard

On September 3, 2025, Nasdaq proposed amendments to its liquidity listing standards for the Nasdaq Capital Market and Nasdaq Global Market to increase the minimum Market Value of Unrestricted Publicly Held Shares (“MVUPHS”) requirement for those companies listing under the net income standard from $5 million to $15 million.  This follows the April rule amendment requiring that MVUPHS can only be satisfied through IPO proceeds and that shares registered for resale may no longer be counted (see HERE).  In addition to making it more difficult for small cap companies to complete a Nasdaq IPO, the proposed rule would eliminate the only material distinction and benefit to listing using the net income standard.

Background

To list its securities on Nasdaq, 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

Rule 144 – A Deep Dive – Part 1

It has been ten years since I summarized Rule 144 (see HERE), and at that time it was a very high level overview, not a deep dive into the numerous intricacies of the rules application.  Rule 144 is likely the most oft used rule by founders, private investors, early investors, affiliates and insiders, and merger/reverse merger participants, and as such deserves some focus.

I will start this blog series with a high-level overview of Rule 144 and then unpack the numerous individual requirements in the following editions.

Rule 144 – Basic Overview

As I repeat again and again, every offer or sale of securities must either be registered or have an available exemption from registration.  Rule 144 promulgated under the Securities Act of 1933 (“Securities Act”) sets forth certain requirements for the use of Section 4(a)(1) for the sale of restricted or control securities by an existing shareholder.  Control securities are those securities held by an affiliate of

Market Wrap-Up Q2 2025

This edition of my market recap covers the second quarter of 2025.  For a review of November and December 2024 see HERE; for October 2024 see HERE; and for Q1 2025 see HERE.

Thirty-three small cap ($30,000,000 and under) IPOs priced in the second quarter of 2025 (20 in April, 5 in May and 8 in June) – a downtrend from Q1 2025.  Below is a chart of relevant deal information for the second quarter IPOs.

Exchange Offer Amount Domestic/Foreign Issuer Banker(s)
Nasdaq Global $30,000,000 Foreign Goldman Sachs (Asia) LLC, Citigroup, US Tiger Securities, CICC, Kingswood
Nasdaq Capital $6,400,000 Foreign D. Boral Capital
Nasdaq Capital $5,000,000 Foreign R.F. Lafferty & Co., Inc.
Nasdaq Capital $7,200,000 Foreign Craft Capital Management
NYSE MKT $10,075,000 Foreign Maxim Group, LLC
Nasdaq Capital $6,000,000 Foreign Dominari Securities, LLC; Revere Securities LLC
Nasdaq Capital $7,000,000 Foreign Craft Capital Management, LLC; Westpark Capital
Nasdaq Capital $7,740,000 Domestic The Benchmark Company; Axiom Capital Management,
Read More »

NYSE Amends Listing Standards For Foreign Private Issuers And Listing Fees For All Issuers

In April the NYSE amended its listing fees for all issuers and in May 2025, amended the standards for foreign private issuers to meet the exchange’s minimum stockholder distribution requirements.  The new rules were enacted a few weeks before the SEC published a concept release and request for comment related to foreign private issuers in general (which will be the subject of an upcoming blog).

NYSE Listed Company Rule 902.03 – Fees for Listed Equity Securities

Effective April 1, 2025, the NYSE amended Listed Company Rule 902.03 to reduce the listed company fees for the first five years following an initial listing.  The amended rule provides that a company that lists on the exchange will only be charged the initial listing fee plus an annual fee calculated on an adjusted basis for any subsequent issuance or other corporate action (“Limited Fee Exemption Period”).

During the Limited Fee Exemption Period, an eligible company will not be charged any other listing fees

Market Wrap-Up – First Quarter 2025

This edition of my market recap covers the first quarter of 2025.  For a review of November and December 2024 see HERE and for October 2024 see HERE.

Forty-two small cap ($30,000,000 and under) IPOs priced in the first quarter of 2025 (13 in January, 15 in February and 14 in March) – a large uptick from 2024.  Below is a chart of relevant deal information for the first quarter IPOs.

Exchange Offer Amount Domestic/Foreign Issuer Banker(s)
Nasdaq Capital $8,000,000 Foreign AC Sunshine Securities, LLC
Nasdaq Capital $6,000,000 Foreign Kingswood Capital Partners, LLC
Nasdaq Capital $5,000,000 Foreign Craft Capital Management, LLC and Boustead Securities, LLC
Nasdaq Capital $7,000,000 Foreign Benjamin Securities, Inc. and Prime Number Capital, LLC
Nasdaq Capital $8,400,000 Foreign R.F. Lafferty & Co., Inc.
Nasdaq Capital $5,614,740 Foreign Bancroft Capital, LLC and Eddid Securities USA
Nasdaq Capital $7,000,000 Foreign Benjamin Securities, Inc. and Prime Number Capital, LLC
NYSE MKT $10,000,000 Domestic Alliance Global Partners
Nasdaq Capital
Read More »

Market Wrap Up – November and December 2024

As promised, I am going to provide regular market wrap-ups for the IPO market as we move forward with the next administration and chapter for our U.S. capital markets.  This edition covers November and December 2024.  For a review of the Market Wrap-Up for October 2024 see HERE.

Nine small cap ($30,000,000 and under) IPOs priced in November 2024 and 12 in December 2024 (compared to 19 in October; 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 November and December IPOs. In October I only included deals up to $25,000,000 but raised the cap to $30,000,000.  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 continue to

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

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 »

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.

NASDAQ Amends Rule 5210 – Listing Prerequisites

In March 2024, the Nasdaq Stock Market quietly amended Rule 5210 requiring that all lead underwriters on an IPO must be Nasdaq members or limited underwriting members as a prerequisite to applying for a listing.  The new rules also created the “limited underwriting member” class and accompanying rules applicable to the group and its associates including eligibility, application process and ongoing requirements.  Although the amendment garnered little attention at the time, now that it has become effective, it is loudly impacting the small cap IPO market.

Rule 5210 – Background

Nasdaq Rule 5210 sets forth the prerequisites for a company to apply for a Nasdaq listing.  Until October 2023, the Rule had 12 subparts with new Rule 5210(l) being added in October 2023 and new Rule 5210(m) being added in March 2024.  Rule 5210(l) requires that any company listing on Nasdaq comply with the recovery of erroneously awarded compensation (Clawback) rules.  For more on the Clawback rules see HERE

Free Writing Prospectus

I’m finding a lot of good segues recently – flowing from my discussion on the definition and implications of shell company status in a reverse merger (see HERE) is the topic of a free writing prospectus (“FWP”).  In particular, what is a free writing prospectus, when and how is it used, and what companies are eligible for its use.

Communications during a registered offering are strictly regulated, including communications before the filing of a registration statement, after filing and before effectiveness, and after effectiveness – for more on communications during the offering process see HERE.  An FWP is a written communication other than the prospectus filed with the SEC, used to make offers, or to market an offering.

An FWP is one of the few writings, beyond the prospectus itself, that may be used to market an offering.  However, its use is limited to eligible companies, or in securities law parlance – those that are not ineligible.  Accordingly,

SEC Adopts Final Rules On SPACs, Shell Companies And The Use Of Projections – Part 10

On January 24, 2024, the SEC adopted final rules enhancing disclosure obligations for SPAC IPOs and subsequent de-SPAC business combination transactions.  The rules are designed to more closely align the required disclosures and legal liabilities that may be incurred in de-SPAC transactions with those in traditional IPOs.  The new rules spread beyond SPACs to shell companies and blank check companies in general.  The compliance date for the new rules is July 1, 2025.

In the first blog in this series, I provided background on and a summary of the new rules – see HERE.  The second blog began a granular discussion of the 581-page rule release starting with partial coverage of new Subpart 1600 to Regulation S-K related to disclosures in SPAC IPO’s and de-SPAC transactions – see HERE.  The third blog in the series continued the summary of Subpart 1600 and in particular the new dilution disclosure requirements – see HERE.  Part 4 continued a

SEC Adopts Final Rules On SPACs, Shell Companies And The Use Of Projections – Part 9

On January 24, 2024, the SEC adopted final rules enhancing disclosure obligations for SPAC IPOs and subsequent de-SPAC business combination transactions.  The rules are designed to more closely align the required disclosures and legal liabilities that may be incurred in de-SPAC transactions with those in traditional IPOs.  The new rules spread beyond SPACs to shell companies and blank check companies in general.  The compliance date for the new rules is July 1, 2025.

In the first blog in this series, I provided background on and a summary of the new rules – see HERE.  The second blog began a granular discussion of the 581-page rule release starting with partial coverage of new Subpart 1600 to Regulation S-K related to disclosures in SPAC IPO’s and de-SPAC transactions – see HERE.  The third blog in the series continued the summary of Subpart 1600 and in particular the new dilution disclosure requirements – see HERE.  Part 4 continued a review of

SEC Adopts Final Rules On SPACS, Shell Companies And The Use Of Projections – Part 8

On January 24, 2024, the SEC adopted final rules enhancing disclosure obligations for SPAC IPOs and subsequent de-SPAC business combination transactions.  The rules are designed to more closely align the required disclosures and legal liabilities that may be incurred in de-SPAC transactions with those in traditional IPOs.  The new rules spread beyond SPACs to shell companies and blank check companies in general.  The compliance date for the new rules is July 1, 2025.

In the first blog in this series, I provided background on and a summary of the new rules – see HERE.  The second blog began a granular discussion of the 581-page rule release starting with partial coverage of new Subpart 1600 to Regulation S-K related to disclosures in SPAC IPO’s and de-SPAC transactions – see HERE.  The third blog in the series continued the summary of Subpart 1600 and in particular the new dilution disclosure requirements – see HERE.  Part 4 continued a

SEC Adopts Final Rules On SPACS, Shell Companies And The Use Of Projections – Part 7

On January 24, 2024, the SEC adopted final rules enhancing disclosure obligations for SPAC IPOs and subsequent de-SPAC business combination transactions.  The rules are designed to more closely align the required disclosures and legal liabilities that may be incurred in de-SPAC transactions with those in traditional IPOs.  The new rules spread beyond SPACs to shell companies and blank check companies in general.  The compliance date for the new rules is July 1, 2025.

In the first blog in this series, I provided background on and a summary of the new rules – see HERE.  The second blog began a granular discussion of the 581-page rule release starting with partial coverage of new Subpart 1600 to Regulation S-K related to disclosures in SPAC IPO’s and de-SPAC transactions – see HERE.  The third blog in the series continued the summary of Subpart 1600 and in particular the new dilution disclosure requirements – see HERE.  Part 4 continued a review of

SEC Adopts Final Rules On SPACS, Shell Companies And The Use Of Projections – Part 6

On January 24, 2024, the SEC adopted final rules enhancing disclosure obligations for SPAC IPOs and subsequent de-SPAC business combination transactions.  The rules are designed to more closely align the required disclosures and legal liabilities that may be incurred in de-SPAC transactions with those in traditional IPOs.  The new rules spread beyond SPACs to shell companies and blank check companies in general.  The compliance date for the new rules is July 1, 2025.

In the first blog in this series, I provided background on and a summary of the new rules – see HERE.  The second blog began a granular discussion of the 581-page rule release starting with partial coverage of new Subpart 1600 to Regulation S-K related to disclosures in SPAC IPO’s and de-SPAC transactions – see HERE.  The third blog in the series continued the summary of Subpart 1600 and in particular the new dilution disclosure requirements – see HERE.  Part 4 continued a review

SEC Adopts Final Rules On SPACS, Shell Companies And The Use Of Projections – Part 5

On January 24, 2024, the SEC adopted final rules enhancing disclosure obligations for SPAC IPOs and subsequent de-SPAC business combination transactions.  The rules are designed to more closely align the required disclosures and legal liabilities that may be incurred in de-SPAC transactions with those in traditional IPOs.  The new rules spread beyond SPACs to shell companies and blank check companies in general.  The compliance date for the new rules is July 1, 2025.

In the first blog in this series, I provided background on and a summary of the new rules – see HERE.  Last week’s blog began a granular discussion of the 581-page rule release starting with partial coverage of new Subpart 1600 to Regulation S-K related to disclosures in SPAC IPO’s and de-SPAC transactions – see HERE.  The third blog in the series continued the summary of Subpart 1600 and in particular the new dilution disclosure requirements – see HERE.  Part 4 continued a

SEC Adopts Final Rules On SPACS, Shell Companies And The Use Of Projections – Part 4

On January 24, 2024, the SEC adopted final rules enhancing disclosure obligations for SPAC IPOs and subsequent de-SPAC business combination transactions.  The rules are designed to more closely align the required disclosures and legal liabilities that may be incurred in de-SPAC transactions with those in traditional IPOs.  The new rules spread beyond SPACs to shell companies and blank check companies in general.  The compliance date for the new rules is July 1, 2025.

In the first blog in this series, I provided background on and a summary of the new rules – see HERE.  Last week’s blog began a granular discussion of the 581-page rule release starting with partial coverage of new Subpart 1600 to Regulation S-K related to disclosures in SPAC IPO’s and de-SPAC transactions – see HERE.  The third blog in the series continued the summary of Subpart 1600 and in particular the new dilution disclosure requirements – see HERE.  This week’s blog will

SEC Adopts Final Rules On SPACS, Shell Companies And The Use Of Projections – Part 3

On January 24, 2024, the SEC adopted final rules enhancing disclosure obligations for SPAC IPOs and subsequent de-SPAC business combination transactions.  The rules are designed to more closely align the required disclosures and legal liabilities that may be incurred in de-SPAC transactions with those in traditional IPOs.  The new rules spread beyond SPACs to shell companies and blank check companies in general.  The compliance date for the new rules is July 1, 2025.

In the first blog in this series, I provided background on and a summary of the new rules – see HERE.  Last week’s blog began a granular discussion of the 581-page rule release starting with partial coverage of new Subpart 1600 to Regulation S-K related to disclosures in SPAC IPO’s and de-SPAC transactions – see HERE.  This week’s blog will continue a review of new Subpart 1600 to Regulation S-K.

New Subpart 1600 of Regulation S-K

The SEC has adopted new Subpart 1600 to

SEC Adopts Final Rules On SPACS, Shell Companies And The Use Of Projections – Part 2

On January 24, 2024, the SEC adopted final rules enhancing disclosure obligations for SPAC IPOs and subsequent de-SPAC business combination transactions.  The rules are designed to more closely align the required disclosures and legal liabilities that may be incurred in de-SPAC transactions with those in traditional IPOs.  The new rules spread beyond SPACs to shell companies and blank check companies in general.

In last week’s blog, I provided background on and a summary of the new rules – see HERE.  This week’s blog begins a granular discussion of the 581-page rule release and its vast implications to not only the SPAC market, but shell company reverse mergers in general.  This week in particular, I will begin coverage of new Subpart 1600 to Regulation S-K related to disclosures in SPAC IPO’s and de-SPAC transactions.

New Subpart 1600 of Regulation S-K

The SEC has adopted new Subpart 1600 to Regulation S-K to: (i) set forth disclosure obligations for

SEC Adopts Final Rules On SPACS, Shell Companies And The Use Of Projections – Part 1

On January 24, 2024, the SEC adopted final rules enhancing disclosure obligations for SPAC IPOs and subsequent de-SPAC business combination transactions.  The rules are designed to more closely align the required disclosures and legal liabilities that may be incurred in de-SPAC transactions with those in traditional IPOs.  The new rules spread beyond SPACs to shell companies and blank check companies in general.

The SEC is specifically requiring enhanced disclosures with respect to compensation paid to sponsors, conflicts of interest, dilution, and the determination, if any, of the board of directors (or similar governing body) of a SPAC regarding whether a de-SPAC transaction is advisable and in the best interests of the SPAC and its shareholders.  The SEC has also adopted rules that deem any business combination transaction involving a reporting shell company, including a SPAC, to involve a sale of securities to the reporting shell company’s shareholders, and has amended several financial statement requirements applicable to transactions involving

2022 Annual Report Of The Office Of The Advocate For Small Business Capital Formation

The Office of the Advocate for Small Business Capital Formation (“Office”) has published its Annual Report for fiscal year 2022 (“Report”).  The Report is delivered to the Committee on Banking, Housing, and Urban Affairs of the U.S. Senate and the Committee on Financial Services of the U.S. House of Representatives directly by the Office, without review or input from the SEC at large.

Background

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).  The mission of the Office is to advocate for pragmatic solutions to accessing capital markets and business growth.

The Office has the following functions: (i) assist small businesses (privately held or public with a market cap of less than $250 million) and their investors in resolving problems with the SEC or self-regulatory organizations; (ii) identify and propose regulatory changes that would benefit small businesses

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,

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

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

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

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 and published a sample

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

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. 

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.

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

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

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

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

Audit Committees – NYSE American

Like Nasdaq, I’ve written several times about the NYSE American listing requirements including the general listing requirements (see HERE) and annual compliance guidelines (see HERE).  As an aside, although the Nasdaq recently enacted significant changes to its initial listing standards, the NYSE American has not done the same and no such changes are currently anticipated.  I suspect that the NYSE American will see a large uptick in new company applicants as a result.

I recently drilled down on audit committee requirements and director independence standards for Nasdaq and in this and the next blog, I will do the same for the NYSE American.  As required by SEC Rule 10A-3, all exchange listed companies are required to have an audit committee consisting of independent directors.  NYSE American Company Guide Rule 803 delineates the requirements independent directors and audit committees.  Rule 803 complies with SEC Rule 10A-3 related to audit committees for companies listed on a national securities exchange.

A Covid IPO: The Virtual Roadshow

Although many aspects of an IPO are unaffected by a pandemic, assuming the capital markets continue to have an appetite for public offerings, the grueling road show has gone virtual, and it may be here to stay.  An old-fashioned road show involved an intense travel schedule and expensive setup.  The new virtual road show can be completed in half the time and a fraction of the price, and interestingly, the IPO’s that have been completed since March 2020, have all priced their deals at the midpoint or higher of their ranges.  The lack of face-to-face presentations is not hurting the deals.

I tend to believe the world has changed forever.  However, fluidity of memory and a capacity to adapt are fundamental human traits and we have and will adapt our business style to adjust to a world where germs are a real enemy and getting sick doesn’t just mean a day or two out of the office.   There has been

A COVID IPO

On June 25, 2020, SEC Chair Jay Clayton gave testimony before the Investor Protection, Entrepreneurship and Capital Markets Subcommittee of the U.S. House Committee on Financial Services on the topic of capital markets and emergency lending in the Covid-19 era.  The next day, on June 26, Chair Clayton, William Hinman, Director of the Division of Corporation Finance, Dalia Blass, Director of the Division of Investment Management and Brett Redfearn, Director of the Division of Trading and Markets issued a public statement on the same topic but expanded to include efforts to ensure the orderly function of U.S. capital markets.

Chair Clayton Testimony

Chair Clayton breaks down his testimony over five topics including: (i) market monitoring and regulatory coordination; (ii) guidance and targeted assistance and relief; (iii) investor protection, education and outreach efforts; (iv) ongoing mission-oriented work; and (v) the SEC’s fiscal-year 2021 budget request.

Market Monitoring and Regulatory Coordination

Despite the extraordinary volumes and volatility we have seen in the

SEC Adopts Amendments To Accelerated And Large Accelerated Filer Definitions

In March, 2020 the SEC adopted amendments to the definitions of an “accelerated filer” and “large accelerated filer.”  The amendments were adopted largely as proposed in May 2019 (see HERE).

A company that is classified as an accelerated or large accelerated filer is subject to, among other things, the requirement that its outside auditor attest to, and report on, management’s assessment of the effectiveness of the issuer’s internal control over financial reporting (ICFR) as required by Section 404(b) of the Sarbanes-Oxley Act (SOX).  The JOBS Act exempted emerging growth companies (EGCs) from this requirement.  Moreover, historically the definition of a smaller reporting company (SRC) was set such that an SRC could never be an accelerated or large accelerated filer, and as such would never be subject to Section 404(b) of SOX.

In June 2018, the SEC amended the definition of an SRC to include companies with less than a $250 million public float (increased

SPAC IPOs A Sign Of Impending M&A Opportunities

The last time I wrote about special purpose acquisition companies (SPACs) in July 2018, I noted that SPACs had been growing in popularity, raising more money in 2017 than in any year since the last financial crisis (see HERE).  Not only has the trend continued, but the Covid-19 crisis, while temporarily dampening other aspects of the IPO market, has caused a definite uptick in the SPAC IPO world.

In April, the Wall Street Journal (WSJ) reported that SPACs are booming and that “[S]o far this year, these special-purpose acquisition companies, or SPACs, have raised $6.5 billion, on pace for their biggest year ever, according to Dealogic. In April, 80% of all money raised for U.S. initial public offerings went to blank-check firms, compared with an average of 9% over the past decade.”

I’m not surprised.  Within weeks of Covid-19 reaching a global crisis and causing a shutdown of the U.S. economy, instead of my phone

SEC Proposes Additional Disclosures For Resource Extraction Companies

In December 2019, the SEC proposed rules that would require resource extraction companies to disclose payments made to foreign governments or the U.S. federal government for the commercial development of oil, natural gas, or minerals.  The proposed rules have an interesting history.  In 2012 the SEC adopted similar disclosure rules that were ultimately vacated by the U.S. District Court.  In 2016 the SEC adopted new rules which were disapproved by a joint resolution of Congress.  However, the statutory mandate in the Dodd-Frank Act requiring the SEC to adopt these rules requiring the disclosure remains in place and as such, the SEC is now taking its third pass at it.

The proposed rules would require domestic and foreign resource extraction companies to file a Form SD on an annual basis that includes information about payments related to the commercial development of oil, natural gas, or minerals that are made to a foreign government or the U.S. federal government.

Proposed Rule 

The

Nasdaq Extends Direct Listings

The Nasdaq Stock Market currently has three tiers of listed companies: (1) The Nasdaq Global Select Market, (2) The Nasdaq Global Market, and (3) The Nasdaq Capital Market. Each tier has increasingly higher listing standards, with the Nasdaq Global Select Market having the highest initial listing standards and the Nasdaq Capital Markets being the entry-level tier for most micro- and small-cap issuers.  For a review of the Nasdaq Capital Market listing requirements, see HERE as supplemented and amended HERE.

On December 3, 2019, the SEC approved amendments to the Nasdaq rules related to direct listings on the Nasdaq Global Market and Nasdaq Capital Market. As previously reported, on February 15, 2019, Nasdaq amended its direct listing process rules for listing on the Market Global Select Market (see HERE).

Interestingly, around the same time as the approval of the Nasdaq rule changes, the SEC rejected amendments proposed by the NYSE big board which would have allowed

Division of Enforcement 2019 Annual Report

As my firm does not practice in the enforcement arena, it is not an area I always write about, but this year I found a few trends that are interesting.  In particular, just by following published enforcement matters on the SEC’s website, I’ve noticed a large uptick in actions to suspend the trading in, or otherwise take action against, micro- and small-cap companies, especially delinquent filers.  I’ve also noticed a large uptick of actions against smaller public and private companies that use misleading means to raise capital from retail investors, and the concurrent use of unlicensed broker-dealers.  Of course, there have always been a significant number of actions involving cryptocurrencies. In light of my own observations, I decided to review and report on the SEC’s view of its actions.

As an aside, before discussing the report, I note that the Government Accountability Office (GAO) has raised concerns about the quality of record keeping and documentation maintained by the

Drill Down On NASDAQ Audit Committee Requirements

I’ve written several times about Nasdaq listing requirements including the general listing requirements (see HERE) and the significant listing standards changes enacted in August of this year (see HERE).  This blog will drill down on audit committees which are part of the corporate governance requirements for listed companies.  Nasdaq Rule 5605 delineates the requirements for a Board of Directors and committees.  The Nasdaq rule complies with SEC Rule 10A-3 related to audit committees for companies listed on a national securities exchange.

SEC Rule 10A-3

SEC Rule 10A-3 requires that each national securities exchange have initial listing and ongoing qualification rules requiring each listed company to have an audit committee comprised of independent directors.  Although the Nasdaq rules detail its independence requirements, the SEC rule requires that at a minimum an independent director cannot directly or indirectly accept any consulting, advisory or other compensation or be affiliated with the company or any of its subsidiaries.  The prohibition against compensation

Nasdaq Direct Listing Rule Change

On April 3, 2018, Spotify made a big board splash by debuting on the NYSE without an IPO. Instead, Spotify filed a resale registration statement registering the securities already held by its existing shareholders. The process is referred to as a direct listing.  As most of those shareholders had invested in Spotify in private offerings, they were rewarded with a true exit strategy and liquidity by becoming the company’s initial public float.  On April 26, 2019, Slack Technologies followed suit, filing a resale Form S-1 with an anticipated direct listing on to the NYSE.

Around this time last year, I published a blog on the direct listing process focusing on the differences between a direct listing onto a national exchange and one onto OTC Markets – see HERE. As the process seems to be gaining in popularity, on February 15, 2019 Nasdaq amended its direct listing process rules. This blog is focused on the Nasdaq direct

An IPO Without The SEC

On January 23, 2019, biotechnology company Gossamer Bio, Inc., filed an amended S-1 pricing its $230 million initial public offering, taking advantage of a rarely used SEC Rule that will allow the S-1 to go effective, and the IPO to be completed, 20 days from filing, without action by the SEC.  Since the government shutdown, several companies have opted to proceed with the effectiveness of a registration statement for a follow-on offering without SEC review or approval, but this marks the first full IPO, and certainly the first of any significant size. The Gossamer IPO is being underwritten by Bank of America Merrill Lynch, SVB Leerink, Barclays and Evercore ISI. On January 24, 2019, Nasdaq issued five FAQ addressing their position on listing companies utilizing Section 8(a).  Although the SEC has recommenced full operations as of today, there has non-the-less been a transformation in the methods used to access capital markets, and the use of 8(a) is just

Shifting Capital Markets; Bank of America’s Merrill Lynch Exits the Penny Stock Business

There is a strange dichotomy building in the capital markets and what some are calling a clearing firm crisis. At the same time that the world of penny stocks and low-priced securities is on shaky ground with regulators and market participants, the U.S. is trying to regenerate the IPO marketplace, and a whole world of cryptocurrency investments and global trading continues to flourish. However, the IPO market cannot flourish for small companies if stockholders cannot clear their securities and sell into a secondary market. Recently, penny stocks have experienced a one-two punch that leaves me, and many of my colleagues, wondering how the marketplace will respond and evolve. Furthermore, as the inevitable birth of securities tokens and an actual licensed operational securities token exchange looms on the near-term horizon, it is clear we are at the precipice of experiencing fundamental changes in the capital markets.

Background on Penny Stocks

Penny stocks and low-priced securities have always been considered speculative and

Proposed SPAC Rule Changes

With the growing popularity of special purpose acquisition companies (SPACs), both the Nasdaq and NYSE have proposed rule changes that would make listings easier, although on June 1, 2018, the Nasdaq withdrew its proposal. SPACs raised more money last year than any year since the financial crisis. The SEC has been delaying action on the proposed rule changes, now pushing off a decision until at least August 2018.

A company that registers securities as a blank check company and whose securities are deemed a “penny stock” must comply with Rule 419 and thus are not eligible to trade. A brief discussion of Rule 419 is below. A “penny stock” is defined in Rule 3a51-1 of the Exchange Act and like many definitions in the securities laws, is inclusive of all securities other than those that satisfy certain delineated exceptions. The most common exceptions, and those that would be applicable to penny stocks for purpose of the SPAC, include: (i)

SEC Amends Definition of “A Smaller Reporting Company”

On June 28, 2018, the SEC adopted the much-anticipated amendments to the definition of a “smaller reporting company” as contained in Securities Act Rule 405, Exchange Act Rule 12b-2 and Item 10(f) of Regulation S-K. The amendments come almost two years to the day since the initial publication of proposed rule changes (see HERE).

Among other benefits, it is hoped that the change will help encourage smaller companies to access US public markets. The amendment expands the number of companies that qualify as a smaller reporting company (SRC) and thus qualify for the scaled disclosure requirements in Regulation S-K and Regulation S-X. The SEC estimates that an additional 966 companies will be eligible for SRC status in the first year under the new definition.

As proposed, and as recommended by various market participants, the new definition of a SRC will now include companies with less than a $250 million public float as compared to the $75 million

Multiple Classes of Stock and the Public Company

In March 2017, Snap Inc. completed its IPO, selling only non-voting Class A common shares to the investing public and beginning an ongoing discussion of the viability and morality of multiple classes of stock in the public company setting. No other company has gone public with non-voting stock on a U.S. exchange.  Although Facebook and Alphabet have dual-class stock structures, shareholders still have voting rights, even though insiders hold substantial control with super-voting preferred stock.

Snap’s stock price was $10.79 on May 7, 2018, well below is IPO opening price of $17.00. Certainly the decline has a lot to do with the company’s floundering app, Snapchat, which famously lost $1.3 billion in value when reality star Kylie Jenner tweeted that she no longer used the app, but the negativity associated with the share structure has made it difficult to attract institutional investors, especially those with a history of activism. Although there was a net increase of $8.8 million in

Going Public Without An IPO

On April 3, 2018, Spotify made a big board splash by debuting on the NYSE without an IPO. Instead, Spotify filed a resale registration statement registering the securities already held by its existing shareholders. The process is referred to as a direct listing. As most of those shareholders had invested in Spotify in private offerings, they were rewarded with a true exit strategy and liquidity by becoming the company’s initial public float.

In order to complete the direct listing process, NYSE had to implement a rule change. NASDAQ already allows for direct listings, although it has historically been rarely used. To the contrary, a direct listing has often been used as a going public method on the OTC Markets and in the wake of Spotify, may gain in popularity on national exchanges as well.

As I will discuss below, there are some fundamental differences between the process for OTC Markets and for an exchange. In particular, when completing a direct

Regulation A+ Continues To Grow

The new Regulation A/A+, which went into effect on June 19, 2015, is now three years old and continues to develop and gain market acceptance. In addition to ongoing guidance from the SEC, the experience of practitioners and the marketplace continue to develop in the area. Nine companies are now listed on national exchanges, having completed Regulation A+ IPO’s, and several more trade on OTC Markets. The NYSE even includes a page on its website related to Regulation A+ IPO’s.  As further discussed herein, most of the exchange traded companies have gone down in value from their IPO offering price, which I and other practitioners attribute to the lack of firm commitment offerings and the accompanying overallotment (greenshoe) option.

On March 15, 2018, the U.S. House of Representatives passed H.R. 4263, the Regulation A+ Improvement Act, increasing the Regulation A+ Tier 2 limit from $50 million to $75 million in a 12-month period.  In September 2017 the House

The Treasury Department Report To The President On Capital Markets

In October 2017, the U.S. Department of the Treasury issued a report to President Trump entitled “A Financial System That Creates Economic Opportunities; Capital Markets” (the “Treasury Report”). The Treasury Report was issued in response to an executive order dated February 3, 2017. The executive order identified Core Principles and requested the Treasury Department to identify laws, treaties, regulations, guidance, reporting and record-keeping requirements, and other government policies that promote or inhibit federal regulation of the U.S. financial system in a manner consistent with the Core Principles. In response to its directive, the Treasury Department is issuing four reports; this one on capital markets discusses and makes specific recommendations related to the federal securities laws.

The Core Principles are:

  1. Empower Americans to make independent financial decisions and informed choices in the marketplace, save for retirement, and build individual wealth;
  2. Prevent taxpayer-funded bailouts;
  3. Foster economic growth and vibrant financial markets through more rigorous regulatory impact analysis that addresses systemic risk
Read More »

SEC Publishes Report on Access to Capital and Market Liquidity

On August 8, 2017 the SEC Division of Economic and Risk Analysis (DERA) published a 315-page report describing trends in primary securities issuance and secondary market liquidity and assessing how those trends relate to impacts of the Dodd-Frank Act, including the Volcker Rule. The report examines the issuances of debt, equity and asset-backed securities and reviews liquidity in U.S. treasuries, corporate bonds, credit default swaps and bond funds. Included in the reports is a study of trends in unregistered offerings, including Regulation C and Regulation Crowdfunding.

This blog summarizes portions of the report that I think will be of interest to the small-cap marketplace.

Disclaimers and Considerations

The report begins with a level of disclaimers and the obvious issue of isolating the impact of particular rules, especially when multiple rules are being implemented in the same time period. Even without the DERA notes that noted trends and behaviors could have occurred absent rule changes or reforms. The financial crisis

Emerging Growth Companies Will Start To Grow Up

The first of emerging growth companies (“EGC’s”) will begin losing EGC status as the five-year anniversary of the creation of an EGC has now passed. Those companies that will lose status as a result of the passage of time are almost unilaterally not pleased with the impending change and concurrent increase in regulatory compliance.

Background

Title I of the JOBS Act, initially enacted on April 5, 2012, created a new category of issuer called an “emerging growth company” (“EGC”).  An EGC is defined as a company with total annual gross revenues of less than $1,070,000,000 during its most recently completed fiscal year that first sells equity in a registered offering after December 8, 2011. An EGC loses its EGC status on the earlier of (i) the last day of the fiscal year in which it exceeds $1,070,000,000 in revenues; (ii) the last day of the fiscal year following the fifth year after its IPO (for example, if the issuer has

The SEC Provides Further Guidance On Financial Statement Requirements In Registration Statements

On August 17, 2017, the SEC issued guidance on financial statement requirements for confidential and public registration statement filings by both emerging growth companies (EGC) and non-emerging growth companies. The new Compliance and Disclosure Interpretations (C&DI’s) follow the SEC’s decision to permit all companies to submit draft registration statements, on a confidential basis (see HERE). The newest guidance is in accord with the SEC’s announced policy to take active measures to promote the U.S. IPO market and small business capital-raise initiatives.

Earlier in the summer, the SEC expanded the JOBS Act benefit available to emerging growth companies, to be able to file confidential draft registration statements, to all companies. Confidential draft submissions are now available for all Section 12(b) Exchange Act registration statements, initial public offerings (IPO’s) and for secondary or follow-on offerings made in the first year after a company becomes publicly reporting.

Title I of the JOBS Act initially allowed for confidential draft submissions of registration

SEC Chair Jay Clayton Discusses Direction Of SEC

In a much talked about speech to the Economic Club of New York on July 12, 2017, SEC Chairman Jay Clayton set forth his thoughts on SEC policy, including a list of guiding principles for his tenure. Chair Clayton’s underlying theme is the furtherance of opportunities and protection of Main Street investors, a welcome viewpoint from the securities markets’ top regulator. This was Chair Clayton’s first public speech in his new role and follows Commissioner Michael Piwowar’s recent remarks to the SEC-NYU Dialogue on Securities Market Regulation largely related to the U.S. IPO market. For a summary of Commissioner Piwowar’s speech, read HERE.

Guiding Principles

Chair Clayton outlined a list of eight guiding principles for the SEC.

#1: The SEC’s Mission is its touchstone

As described by Chair Clayton, the SEC has a three part mission: (i) to protect investors; (ii) to maintain fair, orderly and efficient markets, and (iii) to facilitate capital formation. Chair Clayton stresses that it

SEC Expands Ability To File Confidential Registration Statements

Nominate Us For ABA Journal’s Top Blog- HERE

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On June 19, 2017, the SEC announced that the Division of Corporation Finance will permit all companies to submit draft registration statements, on a confidential basis. Confidential draft submissions will now be available for all Section 12(b) Exchange Act registration statements, initial public offerings (IPO’s) and for secondary or follow-on offerings made in the first year after a company becomes publicly reporting.

The SEC has adopted the change by staff prerogative and not a formal rule change. On June 29, 2017, the SEC issued guidance on the change via new FAQs. The new policy is effective July 10, 2017.

Title I of the JOBS Act initially allowed for confidential draft submissions of registration statements by emerging growth companies but did not include any other companies, such as smaller reporting companies. Regulation A+ as enacted on June 19, 2015, also allows for confidential submissions of an offering circular by companies completing their

SEC Commissioner Piwowar Speaks On The IPO Market

Nominate Us For ABA Journal’s Top Blog- HERE

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On May 16, 2017, SEC Commissioner Michael Piwowar gave the opening remarks to the SEC-NYU Dialogue on Securities Market Regulation. The focus of the SEC-NYU Dialogue was the current state of and outlook for the U.S. IPO market. Mr. Piwowar specifically spoke about reviving the U.S. IPO market.

The declining IPO market has been a topic of review lately, and was one of the main points discussed at the SEC’s Investor Advisory Committee meeting held on June 22. SEC Chair Jay Clayton weighed in at the Investor Advisory Committee, stating that he is “actively exploring ways in which we can improve the attractiveness of listing on our public markets, while maintaining important investor protections.” Mr. Clayton’s words echoed his statements made to the Senate confirmation hearing prior to his swearing in as chair.

This blog summarizes Commissioner Piwowar’s speech and of course offers my views and commentary.

Commissioner Piwowar’s Opening

SEC Issues Additional Guidance on Regulation A+

On March 31, 2017, the SEC Division of Corporation Finance issued six new Compliance and Disclosure Interpretations (C&DI) to provide guidance related to Regulation A/A+. Since the new Regulation A+ came into effect on June 19, 2015, its use has continued to steadily increase. In my practice it is the most popular method for a public offering under $50 million.

As an ongoing commentary on Regulation A+, following a discussion on the CD&I guidance, I have included practice tips, and thoughts on Regulation A+, and a summary of the Regulation A+ rules, including interpretations and guidance up to the date of this blog.

New CD&I Guidance

In the first of the new CD&I, the SEC clarifies the timing of the filing of a Form 8-A to register a class of securities under Section 12(b) or (g) of the Exchange Act.  In particular, in order to be able to file a Form 8-A as part of the Regulation A+

The Senate Banking Committee Passes Several Pro-Business Bills

On March 9, 2017, the Senate Banking Committee approved the first set of bills to go through the committee under the new administration.  The five bills were cleared as one package and are aimed at making it easier for companies to grow and raise capital. The bills are bipartisan and could be some of the first to pass through Congress under the new regime. Only two Democrats opposed the bills: Massachusetts Senator Elizabeth Warren, who is consistently pushing for greater investor protections regardless of the impact on businesses, and Rhode Island Senator Jack Reed.

Interestingly, in 2016, most of these pro-business bills were passed by the House and never made it through the Senate. For a brief outline of the numerous House bills passed in 2016, see my blog HERE. Each of the current bills had already been presented in prior years, either as stand-alone bills or packaged with other provisions, but never made it through the Senate. The

SEC Completes Inflation Adjustment Under Titles I And III Of The Jobs Act; Adopts Technical Amendments

On March 31, 2017, the SEC adopted several technical amendments to rules and forms under both the Securities Act of 1933 (“Securities Act”) and Securities Exchange Act of 1934 (“Exchange Act”) to conform with Title I of the JOBS Act. On the same day, the SEC made inflationary adjustments to provisions under Title I and Title III of the JOBS Act by amending the definition of the term “emerging growth company” and the dollar amounts in Regulation Crowdfunding.

Title I of the JOBS Act, initially enacted on April 5, 2012, created a new category of issuer called an “emerging growth company” (“EGC”). The primary benefits to an EGC include scaled-down disclosure requirements both in an IPO and periodic reporting, confidential filings of registration statements, certain test-the-waters rights in IPO’s, and an ease on analyst communications and reports during the EGC IPO process. For a summary of the scaled disclosure available to an EGC as well as the differences in

Smaller Reporting Companies vs. Emerging Growth Companies

The topic of reporting requirements and distinctions between various categories of reporting companies has been prevalent over the past couple of years as regulators and industry insiders examine changes to the reporting requirements for all companies, and qualifications for the various categories of scaled disclosure requirements. As I’ve written about these developments, I have noticed inconsistencies in the treatment of smaller reporting companies and emerging growth companies in ways that are likely the result of poor drafting or unintended consequences. This blog summarizes two of these inconsistencies.

As a reminder, a smaller reporting company is currently defined as a company that has a public float of less than $75 million in common equity as of the last business day of its most recently completed second fiscal quarter, or if a public float of zero, has less than $50 million in annual revenues as of its most recently completed fiscal year-end. I note that on June 27, 2016, the SEC issued

OTC Markets Amends IPO Listing Standards for OTCQX

OTC Markets has unveiled changes to the quotations rule and standards for the OTCQX, which proposed changes are scheduled to become effective on June 13, 2016.  The proposed amendments are intended to address and accommodate companies completing an IPO onto the OTCQX and which accordingly have no prior trading history.  Such entities either would have a recently cleared Form 211 with FINRA or are completing the 211 application process through a market maker, at the time of their OTCQX application.  The initial qualification changes apply to OTCQX Rules for U.S. Companies, U.S. Banks and International Companies.

The OTCQX previously amended its listing standards effective January 1, 2016 to increase the quantitative criteria for listing and to add additional qualitative requirements further aligning the OTCQX with a national stock exchange.  To read my blog on the January 1, 2016 amendments see HERE.

The new amendments will (i) allow companies that meet the $5 bid price test to use unaudited, interim

The Fast Act (Fixing American’s Surface Transportation Act)

On December 4, 2015, President Obama signed the Fixing American’s Surface Transportation Act (the “FAST Act”) into law, which included many capital markets/securities-related bills. The FAST Act is being dubbed the JOBS Act 2.0 by many industry insiders. The FAST Act has an aggressive rulemaking timetable and some of its provisions became effective immediately upon signing the bill into law on December 4, 2015.

In July 2015, the Improving Access to Capital for Emerging Growth Companies Act (the “Improving EGC Act”) was approved by the House and referred to the Senate for further action. Since that time, this Act was bundled with several other securities-related bills into a transportation bill (really!) – i.e., the FAST Act.

In addition to the Improving EGC Act, the FAST Act incorporated the following securities-related acts: (i) the Disclosure Modernization and Simplifications Act (see my blog HERE ); (ii) the SBIC Advisers Relief Act; (iii) the Reforming Access for Investments in Startup Enterprises Act; (iv)

Going Public Transactions For Smaller Companies: Direct Public Offering And Reverse Merger

Introduction

One of the largest areas of my firms practice involves going public transactions.  I have written extensively on the various going public methods, including IPO/DPOs and reverse mergers.  The topic never loses relevancy, and those considering a transaction always ask about the differences between, and advantages and disadvantages of, both reverse mergers and direct and initial public offerings.  This blog is an updated new edition of past articles on the topic.

Over the past decade the small-cap reverse merger, initial public offering (IPO) and direct public offering (DPO) markets diminished greatly.  The decline was a result of both regulatory changes and economic changes.  In particular, briefly, those reasons were:  (1) the recent Great Recession; (2) backlash from a series of fraud allegations, SEC enforcement actions, and trading suspensions of Chinese companies following reverse mergers; (3) the 2008 Rule 144 amendments, including the prohibition of use of the rule for shell company and former shell company shareholders; (4) problems

SEC Advisory Committee On Small And Emerging Companies Explores Venture Exchanges, Private And Secondary Securities Trading and The NASAA Coordinated Review Program- Part I

The SEC Advisory Committee on Small and Emerging Companies (the “Advisory Committee”) was organized by the SEC to provide advice on SEC rules, regulations and policies regarding “its mission of protecting investors, maintaining fair, orderly and efficient markets and facilitating capital formation” as related to “(i) capital raising by emerging privately held small businesses and publicly traded companies with less than $250 million in public market capitalization; (ii) trading in the securities of such businesses and companies; and (iii) public reporting and corporate governance requirements to which such businesses and companies are subject.”

As previously written about, on March 4, 2015, the committee met and finalized its recommendation to the SEC regarding the definition of “accredited investor.”  My blog on those recommendations can be read HERE.  In addition to finalizing the accredited investor definition recommendation, at the March 4 meeting the Advisory Committee listened to presentations regarding and discussed several important and timely small business initiatives.

I’ve had the

Corporate Communications During the Public Offering Process; Avoid Gun Jumping

The public offering process is divided into three periods: (1) the quiet or pre-filing period, (2) the waiting or pre-effective period, and (3) the post-effective period.  Communications made by the company during any of these three periods may, depending on the mode and content, result in violations of Section 5 of the Securities Act of 1933 (the “Securities Act”).  Communication related violations of Section 5 are often referred to as “gun jumping.”  All forms of communication could create “gun jumping” issues (e.g., press releases, interviews, and use of social media).  “Gun jumping” refers to written or oral offers of securities made before the filing of the registration statement and written offers made after the filing of the registration statement other than by means of a prospectus that meet the requirements of Section 10 of the Securities Act, a free writing prospectus or a communication falling within one of the several safe harbors from the gun-jumping provisions.

Section 5(a) of

COMPREHENSIVE REVIEW OF TITLE I OF THE JOBS ACT AS RELATED TO EMERGING GROWTH COMPANIES

On April 5, 2012, President Obama signed the Jumpstart our Business Startups Act (JOBS Act) into law.  The JOBS Act was passed on a bipartisan basis by overwhelming majorities in the House and Senate.  The Act seeks to remove impediments to raising capital for emerging growth public companies by relaxing disclosure, governance and accounting requirements, easing the restrictions on analyst communications and analyst participation in the public offering process, and permitting companies to “test the waters” for public offerings.   The following is an in-depth review of Title I of the JOBS Act related to Emerging Growth Companies.

Introduction – What is an Emerging Growth Company?

The JOBS Act created a new category of company: an “Emerging Growth Company” (EGC).  An EGC is defined as a company with annual gross revenues of less than $1 billion that first sells equity in a registered offering after December 8, 2011.  In addition, an EGC loses its EGC status on the earlier

Crowdfunding Direct Public Offerings

Background:

As a reminder, on April 5, 2012 President Obama signed the JOBS Act into law. Part of the JOBS Act is the Crowdfunding Act, the full title of which is the “Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act of 2012”. The Crowdfunding Act creates a new exemption to the registration requirements under a newly designated Section 4(6) of the Securities Act of 1933, as amended.  Although the Crowdfunding Act is, by definition, an exemption from the registration requirements and therefore a new form of private placement, innovative and forward thinking minds have already come up with a method of utilizing the crowdfunding methodology for a public, registered offering.

What is a crowdfunding registered offering:

A crowdfunding registered offering is a combination of direct public offering (DPO) and initial public offering (IPO).  As I have blogged about in the past, a DPO is like an IPO except the Issuing Company does not use an underwriter to

Q2 By The Numbers – An Analysis of Market

First, I’d like to give credit to The DealFlow Report which was my initial source for the numerical factual information in this blog.

 

The Numbers and Facts

Q2 reflects the uncertainty that goes along with an election year and the concerns over tax increases (or decreases) that go along with election years.  There also remains the ongoing worry over European markets.  In short, it is a time of change and uncertainty.  Moreover, according to Adam Lyon, a managing director and co-head of private capital at Conaccord Genuity, the small cap financing market, “is probably in for the usual seasonal fluctuations: a tough summer followed by a pick-up in late August and September.”  I note that my law firm has seen this trend consistently for the past decade.

According to data from Dealogic, the number of IPO’s dropped by 41.4% in Q2, however, mainly as a result of the facebook IPO, the dollar value of those IPO’s rose by 56.4%. 

The JOBS Act IPO On-Ramp

I’ve written extensively on the Crowdfunding Act, or Title III of the Jobs Act, and much less extensively on the other five titles of the Act.  Today’s blog will focus on Title I of the Jobs Act – Reopening American Capital Markets to Emerging Growth Companies.  Several industry types have been referring to Title I as the IPO On Ramp and so will I.

The Jobs Act

The JOBS Act created a new category of companies defined as “Emerging Growth Companies” (EGC).  An EGC is defined as a company with annual gross revenues of less than $1 billion that first sells equity in a registered offering after December 8, 2011.  In addition, an EGC loses its EGC status on the earlier of (i) the last day of the fiscal year in which it exceeds $1 billion in revenues; (ii) the last day of the fiscal year following the fifth year after its IPO; (iii) the date on which it

Crowdfunding 101

As I recently blogged, the President has signed the Jobs Act including the much anticipated Crowdfunding bill.  Crowdfunding is a process whereby companies will be able to raise small amounts of money either directly off their own website or using intermediaries set up for the purpose.  The Securities Act of 1933, as amended, (Securities Act) prohibits the sale or delivery of any security unless such security is either registered or exempt from registration.  Crowdfunding will be an exemption from registration.  The exemption will likely be codified as a new and separate exemption likely under Regulation D and will include an overhaul of the current general provisions of Regulation D found in Rules 501-503.

Crowdfunding Exemption Possibilities

 

The exemption will likely be limited to $1 million in any twelve (12) month period, or up to $2 million if the company provides certain financial disclosure such as audited financial statements.  As proposed, each investor will be limited $10,000 or 10%

Gunjumping Restrictions On Communications Related To IPOs

”Gunjumping” is the dissemination of information regarding the Issuer before a complete prospectus has been filed with the Securities and Exchange Commission (“SEC”). Communications prior, during and immediately following the filing of a registration statement are strictly regulated to prevent an Issuer from hyping the market in association with an offering. In addition, the SEC wants to ensure that investors decisions to participate in an offering are based on information that has been reviewed by the SEC and meets the disclosure standards set forth in the securities laws.

Registration Requirements for Sales

During the pre-filing period, Section 5(c) of the Securities Act of 1933, as amended (the “Securities Act”) makes it “unlawful for any person, directly or indirectly, to… offer to sell or offer to buy… any security, unless a registration statement has been filed as to such security.” An offer to sell or offer to buy are broadly defined to include every attempt or offer to dispose of a

Back To Basics – IPO Or Not To IPO?

Initial Public Offerings (IPO’s) are on the rise once again. I have potential clients calling me daily interested in going public through an IPO, most have little or no prior knowledge of the public company arena – so back to basics. An IPO is an initial public offering of securities. Prior to proceeding with an IPO, an Issuer should consider the advantages, disadvantages and alternatives.

The advantages of an IPO include:

  • Access to capital
  • Liquidity of stock
  • Public image and prestige; and
  • Ability to attract and retain better personnel

The disadvantages of an IPO include:

  • Expense – both of the initial transaction and ongoing compliance;
  • Public disclosure of business information – public companies are required to be transparent which can give private competitors an edge;
  • Limitations on long term strategic decisions
  • Civil and criminal liability of executive officers and directors; and
  • Takeover danger

The alternatives to an IPO for an Issuer seeking capital include:

  • A Section 4(2) and/or Regulation D
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