Partner New York
"Companies listed on Nasdaq whose stock price fluctuates around US$1.00 now face heightened requirements to regain compliance and maintain listing status."
Companies listed on Nasdaq whose stock price fluctuates around US$1.00 now face heightened requirements to regain compliance and maintain listing status. Two major changes arise from the new rules:
- No Trading During Appeals Process: If a company trades below the Minimum Bid Price Requirement for 30 consecutive trading days, such company is in violation of the Minimum Bid Price Requirement. The company will then have two 180-days periods to regain compliance, where its securities may continue trading. If the company fails to regain compliance within these periods, the company’s shares will be delisted. This “determination of delisting” may then be appealed to the Nasdaq Listing Qualifications Hearings Panel. Prior to the amended rule, such securities would remain listed and trade on Nasdaq during the appeals process. The amended rule suspends securities from trading while appealing its “determination of delisting.” However, this does not apply to companies that were not afforded the second 180-day compliance period. In that circumstance, the company would not be suspended from trading on Nasdaq during an appeal; and
- Immediate Delisting if Trading Below US$1.00 for 30 Consecutive Trading Days if Within One Year of Reverse Stock Split: If a company effects any reverse stock split, and within one year of that reverse stock split fails to comply with the Minimum Bid Price Requirement, that company will immediately be given a “Delisting Determination” with respect to the noncompliant security, regardless of the ratio. Such company will not be eligible for any compliance period.
For more information on the newly amended Nasdaq rule, please see our previous client alert, Nasdaq Proposes Accelerated Delisting Rules for Companies Trading Below US$1.00.
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Law Clerk (Not admitted in New York) New York
"Nasdaq- and NYSE-listed companies should take pre-cautionary measures to manage these delisting risks."
NYSE Proposes Similar Rules to the Newly Amended Nasdaq Rules
On October 10, 2024, the SEC announced proposed rule changes submitted by the New York Stock Exchange (the “NYSE”) earlier in September, one of which is like the newly amended Nasdaq-rule as discussed above, similarly targeting companies that effect reverse stock splits.
Under current listing standards, if a NYSE-listed company fails to comply with the NYSE minimum-price criteria over a consecutive 30 trading-day period, it is subject to delisting, provided that the NYSE-listed company has six months to cure its noncompliance “if on the last trading day of any calendar month during the cure period the company has a closing share price of at least US$1.00 and an average closing share price of at least US$1.00 over the 30 trading-day period ending on the last trading day of that month.”²
Under NYSE’s proposed amendment,³ if a listed company fails to comply with the minimum closing price and either (a) effected a reverse stock split over the prior one-year period (regardless of the ratio) or (b) effected a reverse stock splits over the prior two-year period with a cumulative ratio of 200 shares or more to one, then the listed company would not be eligible for any compliance period and would be immediately delisted.
Due to these implications, both Nasdaq- and NYSE-listed companies should take pre-cautionary measures to manage these delisting risks.
Footnotes
[1] See Securities Exchange Act Release No. 34-101271 (Oct. 7, 2024), 89 FR 82652 (Aug. 6, 2024) (SR-NASDAQ-2024-045).
[2] See Section 802.01C of the NYSE Listed Company Manual
[3] See Securities Exchange Act Release No. 34-101306 (Oct. 10, 2024), 89 FR 83738 (Sept. 30, 2024) (SR-NYSE-2024-48).
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Partner New York
Law Clerk (Not admitted in New York) New York
