The SEC has approved a rule change to the NYSE listing standards to facilitate the listing of an issuer without conduction an IPO. According to the NYSE, the rule change is necessary to compete for listings that might otherwise by listed on NASDAQ.
As revised, the NYSE will, on a case by case basis, exercise discretion to list companies whose stock is not previously registered under the Exchange Act, when the company is listed upon effectiveness of a registration statement registering only the resale of shares sold by the company in earlier private placements.
In exercising discretion, the NYSE will determine that the company has met the $100,000,000 aggregate market value of publicly-held shares requirement based on a combination of:
- an independent third-party valuation (a “Valuation”) of the company and
- the most recent trading price for the company’s common stock in a trading system for unregistered securities operated by a national securities exchange or a registered broker-dealer (a “Private Placement Market”).
The Exchange will attribute a market value of publicly held shares to the company equal to the lesser of:
- the value calculable based on the Valuation and
- the value calculable based on the most recent trading price in a Private Placement Market.
However, if there is no recent trading in a Private Placement Market, the NYSE will determine that the company has met its market-value of publicly-held shares requirement if the company provides a Valuation evidencing a market value of publicly-held shares of at least $250,000,000.
Any Valuation used must be provided by an entity that has significant experience and demonstrable competence in the provision of such valuations. The Valuation must be of a recent date as of the time of the approval of the company for listing and the evaluator must have considered, among other factors, the annual financial statements required to be included in the registration statement, along with financial statements for any completed fiscal quarters subsequent to the end of the last year of audited financials included in the registration statement.
A valuation agent will not be deemed to be independent if:
- At the time it provides such valuation, the valuation agent or any affiliated person or persons beneficially own in the aggregate as of the date of the valuation, more than 5% of the class of securities to be listed, including any right to receive any such securities exercisable within 60 days.
- The valuation agent or any affiliated entity has provided any investment banking services to the listing applicant within the 12 months preceding the date of the valuation. “Investment banking services” includes acting as an underwriter in an offering for the issuer; acting as a financial adviser in a merger or acquisition; providing venture capital, equity lines of credit, PIPEs (private investment, public equity transactions), or similar investments; serving as placement agent for the issuer; or acting as a member of a selling group in a securities underwriting.
- The valuation agent or any affiliated entity has been engaged to provide investment banking services to the listing applicant in connection with the proposed listing or any related financings or other related transactions.