NASDAQ Finalizes Amendments To Accelerate Delisting Process
On January 17, 2025 the SEC approved Nasdaq’s rule change to accelerate the delisting process for companies that fail to regain compliance with the minimum bid price requirements following a second compliance period and for securities that have had a reverse stock split over the prior one-year period. The final rule was passed as last submitted by Nasdaq, though in between the SEC required substantial additional analysis delaying the process on 3 occassions.
These rule changes follow other recent rule changes meant to reduce the number of ultra micro-cap companies trading on the national exchange and tighten up compliance for those that do meet the standards. In October 2024, Nasdaq amended Rule 5810(c)(3)(A) to allow for an accelerated delisting process where a listed company uses a reverse split to regain compliance with the bid price requirement for continued listing, but that as a result of the reverse split, the company falls below other listing standards, such as the minimum
NYSE Amends Listing Standards Related To Reverse Splits To Meet Minimum Price
On January 15, 2025, the SEC approved amendments to NYSE Listed Company Manual Rule 802.01C to allow for an accelerated delisting process where a listed company uses a reverse split to regain compliance with the bid price requirement for continued listing, but that as a result of the reverse split, the company falls below other listing standards, such as the minimum number of round lot holders, or minimum number of shares in the publicly held float. In October 2024, the SEC approved a similar rule change for Nasdaq – see HERE.
The SEC also approved amendments to Rule 802.01C such that: (i) if a listed company has effected a reverse stock split over the prior one-year period; or (ii) has effected one or more reverse stock splits over the prior two year period with a cumulative ratio of 200:1 or more, the company shall not be eligible for any compliance period and will face immediate suspension and delisting.
Background
Nasdaq Adopts New Reverse Split Rule Change
On November 1, 2023, the SEC approved Nasdaq’s rule changes to the notification and disclosure requirements for reverse splits. The new rules went effective immediately upon approval. For the proposed rule changes see HERE.
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. The majority of reverse splits are completed by companies that trade on the Nasdaq Capital Market tier of the exchange and are completing the split to maintain the minimum $1.00 bid price to avoid delisting.
In response to concerns by Nasdaq that market participants do not have enough visibility on these companies or their
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
