On June 21, 2024, The Nasdaq Stock Exchange (“Nasdaq”) filed a proposed rule change with the Securities and Exchange Commission to modify the application of the bid price compliance period as a result of which a company takes action that causes non-compliance with another listing requirement. Companies that have equity securities with low trading prices often effect reverse stock splits in order to regain compliance with the minimum bid price required by Nasdaq. The reverse stock split then results in a proportionate reduction in the number of publicly-held shares and that, in turn, may have the unintended result of triggering non-compliance by the listed company with other Nasdaq listing rules. Nasdaq’s proposed rule clarifies that the listed company will not be afforded additional time in order to regain compliance as a result of the newly created deficiency. Nasdaq would amend Rule 5810(c)(3)(A) to provide that the listed company will not be considered to have regained compliance if the action its takes in order to regain compliance results in the company then falling below the numeric threshold for another listing requirement. 

A link to the proposed rule can be found here.

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