TheCorporateCounsel.net

Earlier this week, following clarifying amendments to a rule change that Nasdaq had proposed this summer, the SEC has now approved changes to Nasdaq Rule 5810(c)(3)(A).

The gist of the rule, as amended, is that if you use a reverse stock split to regain compliance with the minimum bid price requirement, and that causes you to fall below the minimum number of publicly held shares and holders that Nasdaq standards require, you don’t get extra time to cure the new violation. The SEC notice gives more detail – here’s an excerpt (also see this Cooley blog):

Under the proposed rule, such company will not be considered to have regained compliance with the Bid Price Requirement if the company takes an action to achieve compliance and that action results in the company’s security falling below the numeric threshold for another Exchange listing requirement without regard to any compliance periods otherwise available for that other listing requirement. In such event, the company will continue to be considered non-compliant until both: (i) the other deficiency is cured and (ii) thereafter the company meets the bid price standard for a minimum of ten consecutive business days, unless Nasdaq staff exercises its discretion to extend this ten-day period as discussed in Rule 5810(c)(3)(H).

If the company does not demonstrate compliance with (i) and (ii) during the compliance period(s) applicable to the initial bid price deficiency, Nasdaq will issue a Staff Delisting Determination Letter.

This rule is separate from the one I blogged about earlier this week on “accelerated delistings” for penny stocks – although both involve Rule 5810. In fact, this blog has been corrected a couple hours after publication to reflect the distinction. Nasdaq probably had good reasons for making these two separate proposals, but those reasons aren’t clear to me, and I apologize for adding to any confusion in the original blog post!

– Liz Dunshee