Factors that would be considered include: A reverse merger company would not have to comply with the requirements of Section 102.01F of the Manual if it was listing on the NYSE in connection with an initial firm commitment underwritten public offering (as defined in Section 102.01B of the Manual). Honey, I Lost the Trade Mark: Manuka Honey Declared Not Exclusive to Energy & Sustainability Washington Update June 2023.

NASDAQ Listing Requirements and the Seasoning Rule- The seasoning rules were adopted in late 2011 by multiple national exchanges, including NASDAQ in response to a request from the SEC for the exchanges to limit the ability of companies to uplist following the completion of a reverse merger with a US public shell. While we understand that the Reverse Merger Rule will likely make it more difficult for some smaller Chinese companies to have their stock listed on NASDAQ, we view the Reverse Merger Rule as a long-term positive for Chinese companies looking to list their stock in the United States. All Rights Reserved. inadvisable or unwarranted in the opinion of Nasdaq, even though the securities meet all enumerated criteria for initial or continued listing on Nasdaq.

Risks associated with such entities include their not being able to comply with the SECs filing and internal control requirements and a lack of history of complying with SEC regulations and public company accounting rules.In the last year, the SEC has suspended trading in a number of reverse merger entities and revoked the registration of a number of these companies. 34-65708), the exchanges requested these additional listing requirements because: Prior to the SECs approval of the exchanges rule changes (which approval is required by the Securities Exchange Act of 1934, as amended), the SEC published the proposed rule changes in May 2011, and again in July 2011 with minor revisions, for public comment. Delisting Determination under Rule 5810 to delist the Company's securities. Change of Control, Bankruptcy and Liquidation, and Reverse Mergers, Nasdaq's US Listing Center is powered by ExACT. Authority of all required information about the transaction, including audited financial statements for the combined entity; and. In short, the Reverse Merger Rule seems designed to improve the quality (from a disclosure perspective) of companies it reviews for listing decisions. Because Reverse Merger companies will be deprived of the liquidity, transparency and perception of quality accorded exchange listed companies (in part due to stock exchange policies requiring independent board members, board committees and other corporate governance safeguards not required in the over-the-counter market), the owners of privately-held companies may be more reluctant to engage in a Reverse Merger. Reverse listing companies often also undergo reverse stock splits in order to meet Nasdaqs minimum bid price, which can reduce the number of shareholders below Nasdaqs minimums prior to completion of the reverse listing transaction. The NASDAQ exchange proposed, and presumably will have approved, a substantially similar rule.

Since introducing the. an inactive trading market in the companys securities; the existence of a low number of publicly held shares that were not subject to transfer restrictions; if the reverse merger company had not had a registration statement or other filing subjected to a comprehensive review by the SEC; or. A reverse merger occurs when a privately-held business buys a publicly-held shell company. through the procedures set forth in the Rule 5800 Series. A reverse listing transaction also provides investors with an accelerated path to liquidity and exposes a private company to a new universe of investors. Ogletree, Deakins, Nash, Smoak & Stewart, P.C. The company has maintained the requisite minimum share price ($4 in the case of Nasdaq and the New York Stock Exchange and $3 for NYSE Amex) in the over-thecounter market for a sustained period, and also for at least 30 of the 60 trading days immediately prior to submitting its listing application and the exchanges decision to approve the application for listing (to counter any temporary effect of artificial stock manipulation or a companys reverse stock split). Use of Discretionary Authority, IM-5101-2. Listing Rules; Nasdaq Trader; Rules and Regulation; Rulebook Advanced Search; Market Regulation - US. Library Quick Start Guide; . (1) A Company that is formed by a Reverse Merger (a "Reverse Merger Company") shall be eligible to submit an application for initial listing only if the combined entity has, immediately preceding the filing of the initial listing Merger contingency - Some companies enter into merger agreements but require that the party being acquired have at least a certain stock price level. Regulatory Information. In our experience, an S-4 can be subject to a lengthier review by the SEC than a simple merger proxy, which can extend transaction timelines and increase costs. Stock? Instead, NASDAQs denial simply might cite Listing Rule 5101, rather than the new sections, Listing Rules 5110(c) and 5210(i). Reverse Mergers (1) A Company that is formed by a Reverse Merger (a "Reverse Merger Company") shall be eligible to submit an application for initial . application: (A) traded for at least one year in the U.S. over-the-counter market, on another national securities exchange, or on a regulated foreign exchange, following the filing with the Commission or Other Regulatory While the minimum bid price requirement technically only applies to 30 of the 60 days immediately prior to the listing application, a sudden uptick in trading only in the window immediately before the listing application would make it even easier for FINRA to detect improper patterns. If a shareholder vote on the business

Although the current language of the Reverse Merger Rule is silent about whether a domestic issuer needs to timely file two consecutive periodic filings, the use of the phrase a period of not less than six months for foreign private issuers suggests that a similar six month period should apply to domestic issuers. A reverse listing transaction also provides investors with an accelerated path to liquidity and exposes a private company to a new universe of investors. Under certain state laws the following statements may be required on this website and we have included them in order to be in full compliance with these rules. Finally, the SEC found that the rule exclusions for a $40 million firm commitment underwritten public offering at or about the time of listing or the filing of at least four annual reports with the SEC reasonably accommodate[s] issuers that may present a lower risk of fraud or other illegal activity. In determining the level of such a public offering, the SEC noted that only with a sizeable underwritten public offering does an issuer undergo the due diligence and vetting required to warrant the same treatment as issuers that were not formed through a reverse merger. As to the requirement for a Reverse Merger company to maintain the specified minimum share price for a sustained period, the SEC again explained that the new rules are reasonably designed to address concerns that the potential for manipulation of the stock to meet the minimum price requirements is more pronounced for Reverse Merger companies. redx pharma - boards of redx and jounce reached agreement on terms and conditions of a unanimously recommended all share merger. Based on this review, Nasdaq may determine that the regulatory history rises to the level of a public interest concern, but may also consider whether remedial measures proposed by the Company, if taken, would allay that concern. shall be described in the written decision of the Adjudicatory Body. Based on such review, and in accordance with the Rule 5800 Series, Nasdaq may take any appropriate action, including placing For a Nasdaq company to retain its listing following a reverse listing transaction, the combined entity must meet all of Nasdaqs initial listing criteria. We have also defended the largest broker-dealers on Wall Street in high stakes customer and industry arbitrations; our broker-dealer lawyers You are responsible for reading, understanding and agreeing to the National Law Review's (NLRs) and the National Law Forum LLC's Terms of Use and Privacy Policy before using the National Law Review website. It allows registered users to submit listing applications and required forms electronically. four annual reports with the Commission or Other Regulatory Authority containing all required audited financial statements for a full fiscal year commencing after filing the information described in that paragraph.

Regardless, the new listing requirements will have a substantial impact on these transactions and may discourage Reverse Merger activity, particularly during periods when the traditional IPO market window is closed. Bored Ape Yacht Club NFT Drama Isnt Boring At All. Focusing on voluntary reverse splits fair market value of at least 80% of the value of the deposit account (excluding any deferred underwriters fees and taxes payable on the income earned on the deposit account) at the time of the agreement to enter into the initial combination. Almost all of these companies became public companies in the US by completing a reverse merger, a transaction by which an existing public company (which often engages in little to no active business) acquires all of the equity of another company in return for a negotiated percentage of the public companys stock. A reverse merger company will no longer be subject to the requirements of Nasdaq Rule 5110(c) once it has satisfied the one-year trading requirement discussed above and has filed at least four annual reports with the SEC or other regulatory authority containing all required audited financial statements for a full fiscal year commencing after filing the information described in the first bullet point set forth above.In addition, any reverse merger company must also meet all other applicable Nasdaq listing requirements for initial listing, including the minimum price requirement and the requirement contained in Rule 5210(e) that the company not be delinquent in its filing obligation with the SEC or other regulatory authority.NYSEThe SEC also approved rule changes proposed by the NYSE that impose additional listing requirements for a company that has become public through a reverse merger.The NYSE would treat as a reverse merger any transaction whereby an operating company becomes an Exchange Act-reporting company by combining (directly or indirectly) with a shell company which is an Exchange Act-reporting company, whether through a reverse merger, exchange offer or otherwise.A reverse merger would not include the acquisition of an operating company by an NYSE-listed company which qualified for initial listing under Section 102.06 of the NYSE Listed Company Manual (Manual).In determining whether a company is a shell company, the NYSE will consider, among other factors: The company surviving the reverse merger would not be eligible for listing on the NYSE unless the combined entity had, immediately preceding the filing of the initial listing application, complied with the following requirements of Section 102.01F of the Manual: The NYSE would have the discretion to impose more stringent requirements than those set forth above. We have been lead defense counsel in hundreds of securities class actions, derivative actions, and investigations and enforcement actions by the SEC, FINRA, and state regulators, including some of the largest, most complex, and highly publicized regulatory actions and securities fraud cases filed in recent times. The annual

If the Company's application for initial listing has not been approved prior to consummation of the transaction, Nasdaq will issue a Staff Delisting Determination and begin delisting proceedings pursuant to the Rule 5800 Series.

Nasdaq stands for integrity and ethical business practices in order to enhance investor confidence, thereby contributing to the financial statements required to be audited, or when financial statements do not contain a required certification. Examples of such remedial These transactions are commonly referred to as reverse mergers. In a reverse merger, an existing public shell company, which is a public reporting company with few or no operations, is in effect acquired by a private operating company. New Exchange Requirements the transaction is completed. a Nasdaq Listing. Bankruptcy, Creditors Rights & Business Restructuring, Mergers, Acquisitions & Strategic Alliances, Real Estate Claims & Title Insurance Solutions, Government Contracts & Defense Industries, Employee Benefits, ESOPs & Executive Compensation Law, NASDAQ Proposes Enhanced Requirements for Reverse Merger Companies. Now at least 50 percent of a companys round lot holders must each hold unrestricted securities with a market value of at least $2,500. . management for working capital purposes), pursuant to Rule 13e-4 and Regulation 14E under the Act, which regulate issuer tender offers. 11 min read. Disclaimer. Rick Werner is a partner, co-chair of the Capital Markets and Securities Practice Group, and a member of Haynes and Boones Board of Directors. This alert has been prepared by Hinshaw & Culbertson LLP to provide information on recent legal developments of interest to our readers. The content and links on www.NatLawReview.comare intended for general information purposes only. stringent criteria for the initial or continued listing of particular securities, or suspend or delist particular securities based on any event, condition, or circumstance that exists or occurs that makes initial or continued listing of the securities on Nasdaq Nasdaq is entrusted with the authority to preserve and strengthen the quality of and public confidence in its market. The company announced last week that they . Reverse merger transactions are treated as share acquisitions for tax purposes[7]and are typically structured as a reverse triangular merger, as follows: Greg Kramer practices in the areas of securities law, M&A and alternative lending and serves as co-chair of Haynes and Boone, LLPs New York Capital Markets and Securities Practice Group.

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Nasdaq is the listing venue of choice for the world's most exciting companies. Nasdaq routinely required Reverse Merger companies to file with the SEC at least one Form 10-K with audited financial statements covering periods subsequent to the reverse merger and would typically discount any stock price where only a small percentage of the company's shares were freely tradable. Under the Nasdaq proposal, Nasdaq would treat as a reverse merger any transaction whereby an operating company becomes public by combining with a public shell, whether through a reverse merger, exchange offer or otherwise. Nor will any communication between us establish such a relationship, unless and until we specially agree to serve as your attorneys, which we will not be able to do if you communicate with us by e-mail in connection with a matter for which we already represent you. Until the Company completes a business combination where all conditions in paragraph (b) above are met, the Company must notify Nasdaq on the appropriate form about each proposed business combination.

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