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New York Stock Exchange Proposes New Rules to Harmonize Quantitative Continued Listing Standards and Modify Reverse Merger Listing Requirements

On October 8, the New York Stock Exchange proposed an amendment to Section 802.01B of the NYSE Listed Company Manual that would apply the same financial compliance standards for continued listing on the NYSE to all operating companies. While all NYSE-listed operating companies are subject to continued listing requirements to maintain a minimum stock price and minimum total market capitalization, currently all listed operating companies are subject to additional continued listing standards that vary based on the initial listing standard under which a company was originally listed. Under the proposed rule, a listed operating company would not meet the compliance standards if “its average global market capitalization over a consecutive 30 trading-day period is less than $50,000,000 and, at the same time, its total stockholders’ equity is less than $50,000,000.”

In its proposal, the NYSE noted that under the current regime, there is potential for disparate and unfair treatment of companies that may be deemed noncompliant under the continued listing standards applicable to them, but would be considered compliant under other continued listing standards. The NYSE noted that, although the proposed continued listing standard for the minimum average market capitalization is lower than quantitative requirements under other current continued listing standards, they believe the change will not result in any meaningful weakening of the quality of listed companies.

The NYSE has requested approval of the proposed rule change by the Securities and Exchange Commission on an accelerated basis.

In addition, on September 16, the NYSE proposed an amendment to Section 102.01F of the NYSE Listed Company Manual to modify, in one respect, the circumstances under which a company that emerges from a “reverse merger” with a “shell company” may be eligible to list on the NYSE (to harmonize with requirements imposed by the NASDAQ Stock Market). Prior to the NYSE’s amendment proposal, a “reverse merger company” was first eligible to list on the NYSE only if it had timely filed with the SEC all required reports since the consummation of the reverse merger (including the filing of at least one annual report containing all required audited financial statements for a full fiscal year commencing on a date after the date of filing with the SEC the company’s “super Form 8-K” or other applicable form containing the requisite Form 8-K information). As modified by the amendment, a reverse merger company may list if, as of the date of listing, it has filed all required reports since the reverse merger, including (i) the filing of at least one annual report containing all required audited financial statements for a full fiscal year commencing on a date after the date of filing with the SEC of the “super Form 8-K” and (ii) the timely filing of all required reports for the most recent 12-month period prior to the listing date. This amendment has become effective.

To read the text of the proposed rule changes, click here

To read additional text of the proposed rule changes, click here.

©2020 Katten Muchin Rosenman LLPNational Law Review, Volume III, Number 284

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About this Author

Mark D. Wood, corporate securities lawyer Katten Muchin Chicago Law firm
Partner

Mark D. Wood is head of Katten's Securities practice and concentrates in corporate and securities law. Mark represents public companies, issuers and investment banks in initial public offerings (IPOs) and other public offerings, private investment in public equity (PIPE) transactions, debt securities and other securities matters.

Mark also represents clients in complex corporate transactions, including tender offers, mergers, acquisitions, dispositions, going-private transactions, private equity investments, joint ventures and...

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