[co-author: Joshua Wright, Law Clerk]
On October 11, 2017, the Securities and Exchange Commission (SEC) published for comment a proposal by NASDAQ Stock Market LLC (Nasdaq) to modify its initial and continued listing requirements for special purpose acquisition companies (SPACs).
Initial Listing Requirements in Connection with Initial Public Offering
Round Lot*
Existing: 300 round lot holders
Proposed: 150 round lot holders
* A round lot means 100 shares of a security.
Net Tangible Assets Requirement
Existing: no net tangible assets requirement
Proposed: $5 million in net tangible assets
Proposed Continued Listing Requirements and Post-Business Combination Requirements
Continued Listing
Existing: 300 public holders
Proposed: No holder requirement
Net Tangible Assets Requirement
Existing: no net tangible assets requirement
Proposed: $5 million in net tangible assets
Post-Business Combination Requirement
Existing: Meet all initial listing requirements following the business combination
Proposed: Meet all initial listing requirements within 30-day transition period following the business combination
If the changes to the net tangible assets test are approved, Nasdaq will begin publishing a daily list on the Nasdaq Listing Center of all SPACs that are no longer compliant with the $5 million net tangible asset requirement and do not satisfy any other penny stock exclusion. For SPACs that are already listed on Nasdaq if and when the proposed rules become effective, such SPACs need not increase their net tangible assets to comply with the $5 million requirement, provided that they remain in compliance with the existing continued public holder requirements.
Comments regarding the proposed amendments to Nasdaq’s rules can be submitted on the SEC’s website on or before November 1, 2017. The Release Number for the proposal is SR-NASDAQ-2017-087.
