On October 17, 2019, the Securities and Exchange Commission (SEC) extended the review period for Nasdaq's proposed rule changes relating to direct listings, designating December 3, 2019 as the date on which the SEC will either approve, disapprove, or institute proceedings to determine whether to disapprove, the proposed rule changes.
In February 2019, Nasdaq adopted rule changes for direct listings on The Nasdaq Global Select Market, including, among other things, to 1) clarify the role of a broker-dealer serving as a financial advisor in a direct listing, 2) set forth how Nasdaq will calculate the price-based initial listing requirements for direct listings on The Nasdaq Global Select Market, and 3) require that a company that lists 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.
In August 2019, Nasdaq submitted proposed rule changes to the SEC extending the foregoing rules to direct listings on The Nasdaq Global Market and The Nasdaq Capital Market, respectively (published in the Federal Register here). While the proposed rules are substantially similar to the rules adopted in February 2019, there were some differences including, among others, the following:
What To Do Now?
For now, we shall wait and see whether the SEC will approve, disapprove, or institute proceedings to determine to disapprove, the proposed extension of the direct listing rules to The Nasdaq Global Market and The Nasdaq Capital Market. If approved, companies that may not meet the applicable requirements for listing on The Nasdaq Global Select Market tier will be able to consider undertaking a direct listing on The Nasdaq Global Market or The Nasdaq Capital Market tier.
For more information about Nasdaq's proposed rules, direct listings or any related matter, please contact any WSGR member of the firm's capital markets practice.