Member Article

The New York Stock Exchange (NYSE) and the Nasdaq Stock Market (Nasdaq) recently granted temporary relief and issued guidance to assist companies that are in imminent danger of immediate delisting and/or that are experiencing urgent liquidity needs as a result of the COVID-19 pandemic. The relief and guidance are designed to reduce uncertainty regarding the ability of certain companies to remain listed on the exchanges during the current, highly unusual market conditions, thereby protecting investors, facilitating transactions in securities, and removing impediments to free and open markets.

NYSE

Temporary Suspension of the $15 Million Standard. Section 802.01B of the Listed Company Manual provides, among other things, that the NYSE will promptly initiate suspension and delisting procedures with respect to a listed company if that company is determined to have an average global market capitalization over a consecutive 30 trading-day period of less than $15 million (the “$15 Million Standard”). The SEC recently approved the NYSE’s proposal to suspend the application of the $15 Million Standard to listed companies through June 30. Notably:

• The suspension of the $15 Million Standard will not affect the status of any listed company that had been formally notified of noncompliance with the $15 Million Standard and was in the NYSE’s delisting appeal process prior to March 19.
• Listed companies will not be notified of noncompliance with the $15 Million Standard if the noncompliance occurs on or prior to June 30.
• After June 30, the noncompliance of a listed company with the $15 Million Standard would be determined based upon a consecutive 30 trading-day period commencing on or after July 1.

Proposed Suspension of the $50 Million and $1.00 Standards.Further, the NYSE has also proposed to suspend the application of its $50 million market capitalization standard set forth in Section 802.01B (the “$50 Million Standard”) and $1.00 price per share of common stock standard set forth in Section 802.01C (the “$1.00 Standard”). The $50 Million Standard provides that a listed company will be in non-compliance if it has an average global market capitalization over a consecutive 30 trading-day period that is less than $50 million and, at the same time, shareholders’ equity that is less than $50 million, and the $1.00 Standard provides that a listed company will be in non-compliance if the average closing price of its common stock falls below $1.00 over a consecutive 30 trading-day period.

Temporary Waiver of Shareholder Approval - Related-Party Transaction Rule. Section 312.03(b) of the Listed Company Manual generally requires shareholder approval of any issuance of shares of common stock (or securities convertible into or exercisable for common stock) to a director, officer or a substantial shareholder, or any affiliate of the foregoing (each, a “Related Party”), if the number and/or voting power of the shares being offered exceeds 1% of the number and/or voting power of the company’s then- outstanding shares of common stock (the “Related-Party Transaction Rule”). A limited exception to the Related-Party Transaction Rule permits cash sales of no more than 5% of the then-outstanding shares of the company’s common stock to a Related Party (who is a Related Party solely because such individual or entity is a substantial shareholder) at a price that generally equals or exceeds the current market price (the “Minimum Price Requirement”).

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