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Nasdaq Clarifies and Amends Rules for Direct Listings

By | February 17, 2019

Nasdaq has filed an immediately effective rule proposal that clarifies and amends Nasdaq rules that permit a direct listing without an IPO.  A December 22,2017,  Wall Street Journal article states that Nasdaq had completed about a half dozen direct listings at that time. The NYSE has previously adopted a rule change to permit a direct listing.

Highlights of the Nasdaq proposal include:

  • Direct listings are subject to all initial listing requirements applicable to equity securities and, subject to applicable exemptions, the corporate governance requirements set forth in the Rule 5600 Series. To provide transparency to the initial listing process, the Exchange proposes to adopt Listing Rule IM-5315-1, which will state how the Exchange calculates the initial listing requirements based on the price of a security, including the bid price, market capitalization and market value of publicly held shares for a direct listing on the Nasdaq Global Select Market.
  • Nasdaq also proposes to require that a company that lists on the Nasdaq Global Select Market through a direct listing do so at the time of effectiveness of a registration statement filed under the Securities Act of 1933 solely for the purpose of allowing existing shareholders to sell their shares.
  • Under IM-5315-1, Nasdaq would require that a company listing on the Nasdaq Global Select Market through a Direct Listing provide Nasdaq an independent third-party valuation. Nasdaq will determine that the company has met the market value of publicly held shares requirement for listing on the Nasdaq Global Select Market if the company provides a valuation evidencing a market value of publicly held shares of at least $250,000,000.

The rule filing only relates to the Nasdaq Global Select Market.  Nasdaq intends to subsequently file a proposed rule change under Section 19(b) of the Exchange Act to adopt requirements for the Nasdaq Capital and Global Markets applicable to companies which have not been listed on a national securities exchange or traded in the over-the-counter market pursuant to FINRA Form 211 immediately prior to the initial pricing and wish to list their securities to allow existing shareholders to sell their shares.

Contact Steve Quinlivan for more information.