As we have previously discussed on our blog, the securities exchanges impose shareholder vote requirements in connection with certain financing transactions.  These rules are often referred to as the “20% Rule,” since, for Nasdaq, for example, a shareholder vote is required to be obtained by a listed company that intends to complete certain private placement transactions that will result in the issuance of 20% or more of the total pre-transaction voting shares outstanding.   We discuss these rules in our recently updated FAQs (see: https://goo.gl/aagwaA).

Recently, Nasdaq filed with the SEC an amendment that would update certain of these rules.  Nasdaq had solicited comments on these changes (see our prior post from the summer (available here: https://goo.gl/i156t5).  The proposal would, among other things:

  • amend the measure of “market value” in connection with assessing whether a transaction is being completed at a discount from the closing bid price to the lower of:  the closing price as reflected by Nasdaq, or the average closing price of the common stock for the five trading days preceding the definitive agreement date;
  • refer to the above price as the “Minimum Price,” and existing references to “book value” and “market value” used in Rule 5635(d) will be eliminated; and
  • eliminate the references to “book value” for purposes of the shareholder vote requirement.

See the full text of the amendments here: https://goo.gl/vswnxc.