Continued listing requirements
The Nasdaq continued listing requirements require companies to, among other things, maintain a minimum share price1 and market value of publicly held shares2 (together, the Price-Based Requirements). If a listed company fails to meet either of these requirements for a period of 30 consecutive business days, Nasdaq will send a deficiency notice to the listed company, advising that the company has been afforded a compliance period of 180 calendar days to regain compliance with the applicable requirements.
Under Nasdaq’s proposed relief, (1) the compliance periods for any newly identified noncompliance with the Price-Based Requirements will not begin until July 1, 2020, and (2) the compliance periods for any company previously notified that it was not in compliance will be suspended and will resume on July 1. For example, if a company is 120 days into its first 180-day compliance period for a minimum share price deficiency when the tolling period starts and the company does not regain compliance before June 30, 2020, the company would have an additional 60 days, starting on July 1, 2020, to regain compliance. Similarly, companies that were engaged in the Nasdaq hearings process would return to that process at the same stage they were in when the tolling period began. However, a company in the hearings process would nonetheless be delisted and not get the benefit of the tolling period if the company has had an oral or written hearing before a hearings panel and the panel has reached a determination to delist, even if the hearings panel has not issued the written decision prior to the proposed rule change taking effect.
Throughout the tolling period, Nasdaq would continue to monitor listed companies’ compliance with the Price-Based Requirements, and listed companies would continue to be notified about new instances of noncompliance or regaining compliance with such requirements in each case in accordance with existing Nasdaq rules. Companies that receive a deficiency notice would continue to be required by Nasdaq rules to make a public announcement disclosing receipt of the deficiency notice by filing a form 8-K, where required by SEC rules, or by issuing a press release.
Nasdaq has requested that the SEC waive the 30-day operative delay, as well as the five business days’ prior notice requirement contained in the SEC’s rules, so that the temporary relief can take effect immediately as of April 16, 2020, removing any uncertainty for listed companies and their investors that would benefit from the relief. The proposal follows a memorandum issued by Nasdaq on March 26, 2020, entitled Information for Nasdaq Listed Companies About the Impact of Coronavirus (COVID-19),3 which provided certain guidance for its listed companies impacted by the COVID-19 pandemic, including, among others, application of financial viability exceptions to the shareholder approval rules.
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- Nasdaq’s continued listing requirements relating to minimum bid price are set forth in Nasdaq Listing Rules 5450(a)(1), 5460(a)(3), 5550(a)(2), and 5555(a)(1). The related compliance periods are set forth in Rule 5810(c)(3)(A).
- Nasdaq’s continued listing requirements relating to market value of publicly held shares are set forth in Nasdaq Listing Rules 5450(b)(1)(C), 5450(b)(2)(C), 5450(b)(3)(C), 5460(a)(2), 5550(a)(5), and 5555(a)(4). The related compliance period is set forth in Rule 5810(c)(3)(D).
- Information for Nasdaq listed companies about the impact of Coronavirus (COVID-19) (as of April 17, 2020).
Client Alert 2020-250