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.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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