NASDAQ

NASDAQ Continued Listing Requirements

Although I often write about initial listing standards, I realized that I have not yet blogged about the reduced ongoing listing standards for national exchanges. In this blog, I will cover the continued listing requirements for Nasdaq listed companies and in next week’s blog I will cover the NYSE/NYSE MKT. For a review of initial listing requirements for the Nasdaq Capital Markets and NYSE MKT see HERE.

Nasdaq Capital Markets

To continue listing on Nasdaq Capital Markets, a company is required to meet certain ongoing quantitative and qualitative requirements. NASDAQ also requires listed companies to meet stringent corporate governance standards.

In order to continue listing on Nasdaq Capital Markets a company must meet all of the following requirements: (i) at least 2 market makers; (ii) a $1 minimum bid price; (iii) at least 300 unrestricted round lot public shareholders; (iv) at least 500,000 publicly held shares; and (v) a market value of publicly held shares of at least $1

October 3, 2023

NASDAQ Proposes Reverse Split Rule Changes

In July Nasdaq filed a proposed rule change with the SEC to establish listing standards related to notification and disclosure requirements of reverse splits. As of the writing of this blog, the proposed rule change has received only a single comment, which supported the change.

Background

After the market highs of the second half of 2020 and all of 2021, we have all witnessed the general decline, including noticeably depressed valuations and market price, especially in the small cap space. In 2022, Nasdaq processed 196 reverse stock splits, compared to 31 in 2021 and 94 in 2020. As of June 23, 2023, Nasdaq has processed 164 reverse stock splits, and projects significantly more throughout 2023. In its rule proposal, Nasdaq notes that the majority of reverse splits are effectuated by smaller companies that do not have broad media or research coverage. These companies generally trade on the Nasdaq Capital Market tier of the exchange and are completing reverse splits

September 19, 2023

Who Is An “Affiliate” And Why Does It Matter – Exchange Act; Determining Filer Status

The concept of affiliation resonates throughout the federal securities laws, including pertaining to both the Securities Act and Exchange Act rules, regulations and forms and Nasdaq and NYSE compliance. In this multi-part series of blogs, I am unpacking what the term “affiliate” means and its implications. The first blog in the series began with an analysis of the Securities Act definition of “affiliate” and the implications under Rule 144, Section 4(a)(7) and Form S-3 eligibility (see HERE). The second delved into the topic of a primary vs. secondary offering, which itself hinges on whether the offeror is an affiliate (see HERE). In this third part of the series, I will discuss the meaning and implications of an “affiliate” under the Exchange Act.

Exchange Act Definition of Affiliate

Exchange Act Rule 12b-2 defines an affiliate the same as the Securities Act, to wit: ‘An affiliate’ of, or a person “affiliated” with, a specified person, is a person that

August 22, 2023

Who Is An Affiliate And Why Does It Matter – Primary VS Secondary Offering

The concept of affiliation resonates throughout the federal securities laws, including pertaining to both the Securities Act and Exchange Act rules, regulations and forms and Nasdaq and NYSE compliance. In this multipart series of blogs, I will unpack what the term “affiliate” means and its implications. This first blog in the series began with an analysis of the Securities Act definition of “affiliate” and the implications under Rule 144, Section 4(a)(7) and Form S-3 eligibility (see HERE). In this Part 2 of the series, I am delving into the meaty topic of a primary vs. secondary offering, which itself hinges on whether the offeror is an affiliate.

Secondary/Resale Offerings vs. Primary Offerings

A secondary offering is an offering made by or on behalf of bona fide selling shareholders and not by or on behalf of the registrant company. A secondary offering can only occur after a company is public. That is, even if a company goes public

August 15, 2023

Who Is An Affiliate And Why Does It Matter – Part 1

WHO IS AN “AFFILIATE” AND WHY DOES IT MATTER? PART 1

The concept of affiliation resonates throughout the federal securities laws, including pertaining to both the Securities Act and Exchange Act rules, regulations and forms and Nasdaq and NYSE compliance. In this multipart series of blogs, I will unpack what the term “affiliate” means and its implications. This first blog in the series begins with the Securities Act definition of an “affiliate” and the implications under Rule 144, Section 4(a)(7) and Form S-3 eligibility. In Part 2 of the series, I will delve into the meaty topic of a primary vs. secondary offering, which itself hinges on whether the offeror is an affiliate.

Securities Act Definition of Affiliate

The Securities Act provides a statutory definition of an “affiliate” to begin what is a facts and circumstances analysis (as is common in the federal securities laws). Rule 405 of the Securities Act defines an “affiliate” as “[A]n affiliate of, or

August 8, 2023

Nasdaq Board Diversity Matrix In Practice

Although the compliance deadline for the requirement to add diverse directors was extended, the board diversity matrix disclosure form (“Board Diversity Matrix”) requirement is now in its second year.

Nasdaq Rule 5606(a) requires Nasdaq listed companies to publicly disclose, in an aggregated form, to the extent permitted by law (for example, some foreign countries may prohibit such disclosure), information on the voluntary self-identified gender and racial characteristics and LGBTQ+ status of the company’s board of directors as part of the ongoing corporate governance listing requirements. Each company must provide an annual Board Diversity Matrix disclosure, including: (i) the total number of directors; (ii) the number of directors based on gender identity (female, male or non-binary); (iii) the number of directors that did not disclose gender; (iv) the number of directors based on race and ethnicity; (v) the number of directors who self-identify as LGBTQ+; and (vi) the number of directors who did not disclose a demographic background.

August 1, 2023

Nasdaq Amends Pricing Limitations Rules In A Direct Listing

The rules related to direct listings continue to evolve, with the latest Nasdaq rule change being approved on December 2, 2022, although their utilization has been slow to gain traction. Despite the Exchange’s efforts to make the process more attractive and viable, based on a few articles on the subject, only 10 companies had gone public via direct listing as of December 31, 2021, and I could not find a single example of any others since that time. Moreover, and certainly due to the elevated listing standards and arduous process, each of the companies have been much more mature such as Spotify, Slack, Palantir and Coinbase.

In any event, both Nasdaq and the NYSE continue with an “if we build it they will come” approach. After multiple iterations with the SEC, both Nasdaq and the NYSE approved rules that allow a company to raise capital concurrently with a direct listing (see HERE). The very handy Nasdaq Initial Listing Guide

May 16, 2023

SEC Continues It’s Crypto Focus

In the year and a half since Gary Gensler made it clear to the world that he intends to focus on the crypto “wild west” (see HERE) things have gone from bad to worse for the industry. Of course, it is not all the SEC’s extreme crypto scrutiny that is causing problems, but the very real crypto winter including the collapse of the FTX exchange and its FTX Future Fund, and the realization that the metaverse of tomorrow, will actually not be here until… tomorrow have all added to industry problems. Not to mention a slew of bankruptcy filings (FTX, Blockfi, Celsius and Voyager) and several other precarious financial positions (Blockchain.com, Coinbase, Crypto.com and Genesis, to name a few).

However, putting aside the crypto industry financial crisis, the U.S. regulators, including the SEC, FINRA and national exchanges, are scrutinizing any business with even a modicum of crypto focus to the point where it is almost impossible to move

April 18, 2023

Guidance On Executive Compensation Clawback Rules; NYSE And Nasdaq Issue Proposed 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 clawback of compensation under certain circumstances as a listing qualification. The proposed rules were first published in July 2015 (see HERE) and have moved around on the SEC semiannual regulatory agenda from proposed to long-term and back again for years.

The Clawback Rules add a check box to Forms 10-K, 20-F and 40-F to indicate whether the form includes the correction of an error in previously issued financial statements and a related recovery analysis. Although the check box has already been added to the Forms, the new Clawback Rules are not effective until November 28, 2023. As such, the SEC has issued guidance regarding compliance with the check box in

April 4, 2023

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

December 6, 2022

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NASDAQ

NASDAQ Continued Listing Requirements

NASDAQ Proposes Reverse Split Rule Changes

Who Is An “Affiliate” And Why Does It Matter – Exchange Act; Determining Filer Status

Who Is An Affiliate And Why Does It Matter – Primary VS Secondary Offering

Who Is An Affiliate And Why Does It Matter – Part 1

Nasdaq Board Diversity Matrix In Practice

Nasdaq Amends Pricing Limitations Rules In A Direct Listing

SEC Continues It’s Crypto Focus

Guidance On Executive Compensation Clawback Rules; NYSE And Nasdaq Issue Proposed Rules

Small-Cap IPO Volatility – The China Connection

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