Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change To Modify Certain Pricing Limitations for Companies Listing in Connection With a Direct Listing Primary Offering, 34815-34819 [2021-13916]
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Federal Register / Vol. 86, No. 123 / Wednesday, June 30, 2021 / Notices
A proposed rule change filed under
Rule 19b–4(f)(6) 20 normally does not
become operative prior to 30 days after
the date of filing. However, Rule 19b–
4(f)(6)(iii) 21 permits the Commission to
designate a shorter time if such action
is consistent with the protection of
investors and the public interest. The
Exchange has asked the Commission to
waive the 30-day operative delay so that
the proposed rule change may become
operative immediately upon filing. The
Exchange states that waiver of the
operative delay would be consistent
with the protection of investors and the
public interest because it would enable
the Exchange to clarify its rule text
without delay while continuing to
maintain the Exchange’s existing rules
designating Legging Orders for last
priority. For this reason, and because
the proposed rule change does not raise
any novel regulatory issues, the
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest. Accordingly, the
Commission hereby waives the 30-day
operative delay and designates the
proposed rule change as operative upon
filing.22
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
jbell on DSKJLSW7X2PROD with NOTICES
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BOX–2021–16 on the subject line.
CFR 240.19b–4(f)(6).
CFR 240.19b–4(f)(6)(iii).
22 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–BOX–2021–16. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method.
The Commission will post all
comments on the Commission’s internet
website (https://www.sec.gov/rules/
sro.shtml). Copies of the submission, all
subsequent amendments, all written
statements with respect to the proposed
rule change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, on official business
days between the hours of 10:00 a.m.
and 3:00 p.m., located at 100 F Street
NE, Washington, DC 20549. Copies of
such filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–BOX–2021–16 and should
be submitted on or before July 21, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–13915 Filed 6–29–21; 8:45 am]
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92256; File No. SR–
NASDAQ–2021–045]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing of Proposed Rule Change To
Modify Certain Pricing Limitations for
Companies Listing in Connection With
a Direct Listing Primary Offering
June 24, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 11,
2021, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I and II below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to modify
certain pricing limitations for
companies listing in connection with a
Direct Listing primary offering in which
the company will sell shares itself in the
opening auction on the first day of
trading on Nasdaq.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/nasdaq/rules, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
1 15
23 17
PO 00000
CFR 200.30–3(a)(12).
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2 17
E:\FR\FM\30JNN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
Nasdaq recently adopted Listing Rule
IM–5315–2 to permit a company to list
in connection with a primary offering in
which the company will sell shares
itself in the opening auction on the first
day of trading on the Exchange (a
‘‘Direct Listing with a Capital Raise’’); 3
created a new order type (the ‘‘CDL
Order’’), which is used during the
Nasdaq Halt Cross (the ‘‘Cross’’) for the
shares offered by the company in a
Direct Listing with a Capital Raise; and
established requirements for
disseminating information, establishing
the opening price and initiating trading
through the Cross in a Direct Listing
with a Capital Raise.4 For a Direct
Listing with a Capital Raise, Nasdaq
rules currently require that the actual
price calculated by the Cross be at or
above the lowest price and at or below
the highest price of the price range
established by the issuer in its effective
registration statement (the ‘‘Pricing
Range Limitation’’).
Nasdaq now proposes to modify the
Pricing Range Limitation such that a
Direct Listing with a Capital Raise can
be executed in the Cross at a price that
is at or above the price that is 20%
below the lowest price and at or below
the price that is 20% above the highest
price of the price range established by
the issuer in its effective registration
statement.5 In addition, Nasdaq
proposes to modify the Pricing Range
Limitation such that a Direct Listing
with a Capital Raise can be executed in
the Cross at a price above the price that
is 20% above the highest price of such
price range, provided that the company
has certified to Nasdaq that such price
would not materially change the
company’s previous disclosure in its
effective registration statement. Nasdaq
3 A Direct Listing with a Capital Raise includes
situations where either: (i) Only the company itself
is selling shares in the opening auction on the first
day of trading; or (ii) the company is selling shares
and selling shareholders may also sell shares in
such opening auction.
4 See Securities Exchange Act Release No. 91947
(May 19, 2021), 86 FR 28169 (May 25, 2021) (the
‘‘Approval Order’’).
5 References in this proposal to the price range
established by the issuer in its effective registration
statement are to the price range disclosed in the
prospectus in such registration statement.
Separately, as explained in more details below,
Nasdaq proposes to prescribe that the 20%
threshold will be calculated using the high end of
the price range in the prospectus at the time of
effectiveness and may be measured from either the
high end (in the case of an increase in the price)
or low end (in the case of a decrease in the price)
of that range.
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also proposes to make related
conforming changes.
Listing Rule IM–5315–2 requires that
securities listing in connection with a
Direct Listing with a Capital Raise must
begin trading on Nasdaq following the
initial pricing through the Cross, which
is described in Rules 4120(c)(9) and
4753. Rule 4120(c)(9) requires that in
the case of a Direct Listing with a
Capital Raise, for purposes of releasing
securities for trading on the first day of
listing, Nasdaq, in consultation with the
financial advisor to the issuer, will
make the determination of whether the
security is ready to trade.
Currently, in the case of the Direct
Listing with a Capital Raise, a security
is not released for trading by Nasdaq
unless the actual price calculated by the
Cross is at or above the lowest price and
at or below the highest price of the price
range established by the issuer in its
effective registration statement.6
Specifically, under Rule 4120(c)(9)(B)
Nasdaq shall release the security for
trading only if: (i) All market orders will
be executed in the Cross; and (ii) the
actual price calculated by the Cross
complies with the Pricing Range
Limitation.
If there is insufficient buy interest to
satisfy the CDL Order and all other
market orders, as required by the rule,
or if the actual price calculated by the
Cross is outside the price range
established by the issuer in its effective
registration statement, the Cross would
not proceed and such security would
not begin trading. Nasdaq shall
postpone and reschedule the offering
only if either or both such conditions
are not met. In such event, because the
Cross cannot be conducted, the
Exchange would postpone and
reschedule the offering and notify
market participants via a Trader Update
that the Direct Listing with a Capital
Raise scheduled for that date has been
cancelled and any orders for that
security that have been entered on the
Exchange would be cancelled back to
the entering firms.
Proposed Change to Rule 4120(c)(9)
While many companies are interested
in alternatives to the traditional IPOs,
based on conversations with companies
and their advisors Nasdaq believes that
there may be a reluctance to use the
existing Direct Listing with a Capital
Raise rules because of concerns about
the Pricing Range Limitation.
One potential benefit of a Direct
Listing with a Capital Raise as an
alternative to a traditional IPO is that it
could maximize the chances of more
efficient price discovery of the initial
public sale of securities for issuers and
investors. Unlike an IPO where the
offering price is informed by
underwriter engagement with potential
investors to gauge interest in the
offering, but ultimately decided through
negotiations between the issuer and the
underwriters for the offering, in a Direct
Listing with a Capital Raise the initial
sale price is determined based on
market interest and the matching of buy
and sell orders in an auction open to all
market participants. In that regard, in
the Approval Order the Commission
stated that:
The opening auction in a Direct Listing
with a Capital Raise provides for a different
price discovery method for IPOs which may
reduce the spread between the IPO price and
subsequent market trades, a potential benefit
to existing and potential investors. In this
way, the proposed rule change may result in
additional investment opportunities while
providing companies more options for
becoming publicly traded.7
A successful initial public offering of
shares requires sufficient investor
interest. If an offering cannot be
completed due to lack of investor
interest, there is likely to be a
substantial amount of negative publicity
for the company and the offering may be
delayed or cancelled. The Pricing Range
Limitation imposed on a Direct Listing
with a Capital Raise (but not on a
traditional IPO) increases the
probability of such a failed offering
because the offering cannot proceed
without some delay not only for the lack
of investor interest, but also if investor
interest is greater than the company and
its advisors anticipated. In the Approval
Order, the Commission noted a frequent
academic observation of traditional firm
commitment underwritten offerings that
the IPO price, established through
negotiation between the underwriters
and the issuer, is often lower than the
price that the issuer could have
obtained for the securities, based on a
comparison of the IPO price to the
closing price on the first day of trading.8
Nasdaq believes that the price range in
a company’s effective registration
statement for a Direct Listing with a
Capital Raise would similarly be
determined by the company and its
advisors and, therefore, there may be
instances of offerings where the price
determined by the Nasdaq opening
auction will exceed the highest price of
the price range in the company’s
effective registration statement.
As explained above, under the
existing rule a security subject to a
7 See
6 See
PO 00000
Rule 4120(c)(9)(B).
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8 See
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Approval Order, 86 FR at 28177.
Approval Order, footnote 91.
30JNN1
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Federal Register / Vol. 86, No. 123 / Wednesday, June 30, 2021 / Notices
Direct Listing with a Capital Raise
cannot be released for trading by Nasdaq
if the actual price calculated by the
Cross is above the highest price of the
price range established by the issuer in
its effective registration statement. In
this case, Nasdaq would have to cancel
or postpone the offering until the
company amends its effective
registration statement. At a minimum,
such a delay exposes the company to
market risk of changing investor
sentiment in the event of an adverse
market event. In addition, as explained
above, the determination of the public
offering price of a traditional IPO is not
subject to limitations similar to the
Pricing Range Limitation for a Direct
Listing with a Capital Raise, which, in
Nasdaq’s view, could make companies
reluctant to use this alternative method
of going public despite its expected
potential benefits.
Accordingly, Nasdaq proposes to
modify the Pricing Range Limitation
such that in the case of the Direct
Listing with a Capital Raise, a security
shall not be released for trading by
Nasdaq unless the actual price at which
the Cross would occur is at or above the
price that is 20% below the lowest price
of the price range established by the
issuer in its effective registration
statement and at or below the price that
is 20% above the highest price of the
price range. In other words, Nasdaq
would release the security for trading,
provided all other necessary conditions
are satisfied, even if the actual price
calculated by the Cross is outside the
price range established by the issuer in
its effective registration statement;
provided however that the actual price
cannot be more than 20% below the
lowest price or more than 20% above
the highest price of such range; and the
company specified the quantity of
shares registered, as permitted by
Securities Act Rule 457, as explained
below. In addition, there would be no
limitation on releasing the security for
trading at a price above the price that is
20% above the highest price of the price
range established by the issuer in its
effective registration statement if the
company has certified to Nasdaq that
such offering price would not materially
change the company’s previous
disclosure in its effective registration
statement.
Nasdaq believes that this approach is
consistent with SEC Rule 430A and
question 227.03 of the SEC Staff’s
Compliance and Disclosure
Interpretations, which generally allow a
company to price a public offering 20%
outside of the disclosed price range
without regard to the materiality of the
changes to the disclosure contained in
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the company’s registration statement.9
Nasdaq believes such guidance also
allows deviation above the price range
beyond the 20% threshold if such
change or deviation does not materially
change the previous disclosure.
Accordingly, Nasdaq believes that a
company listing in connection with a
Direct Listing with a Capital Raise can
specify the quantity of shares registered,
as permitted by Securities Act Rule 457,
and, when an auction prices outside of
the disclosed price range, use a Rule
424(b) prospectus, rather than a posteffective amendment, when either (i) the
20% threshold noted in Rule 430A is
not exceeded, regardless of the
materiality or non-materiality of
resulting changes to the registration
statement disclosure that would be
contained in the Rule 424(b) prospectus,
or (ii) when there is a deviation above
the price range beyond the 20%
threshold noted in Rule 430A if such
deviation would not materially change
the previous disclosure, in each case
assuming the number of shares issued is
not increased from the number of shares
disclosed in the prospectus. Consistent
with the Commission’s Staff guidance
on Rule 430A, Nasdaq proposes to
prescribe that this 20% threshold will
be calculated using the high end of the
price range in the prospectus at the time
of effectiveness and may be measured
from either the high end (in the case of
an increase in the price) or low end (in
the case of a decrease in the price) of
that range.
Finally, given that, as proposed, there
may be a Direct Listing with a Capital
Raise that could price outside the price
range of the company’s effective
registration statement and that there
may be no upside limit above which the
Cross could not proceed, in each
instance of a Direct Listing with a
Capital Raise, Nasdaq will issue an
industry wide trader alert 10 to inform
the market participants that the auction
could price up to 20% below the lowest
price of the price range in the
company’s effective registration
statement and specify what that price is.
Nasdaq will also indicate in such trader
alert whether or not there is an upside
9 Securities Act Rule 457 permits issuers to
register securities either by specifying the quantity
of shares registered, pursuant to Rule 457(a), or the
proposed maximum aggregate offering amount.
Nasdaq expects that companies selling shares
through a Direct Listing with a Capital Raise will
register securities by specifying the quantity of
shares registered and not a maximum offering
amount. See also Compliance & Disclosure
Interpretation of Securities Act Rules #227.03 at
https://www.sec.gov/divisions/corpfin/guidance/
securitiesactrules-interps.htm.
10 Trader alert is an industry wide subscription
based free service provided by Nasdaq.
PO 00000
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34817
limit above which the Cross could not
proceed, based on the company’s
certification, as described above. If there
is no upside limit, Nasdaq will caution
the market participants about the use of
market orders explaining that unlike a
limit order a market order can be
executed at any price determined by the
Cross.
Proposed Conforming Changes to
Listing Rule IM–5315–2
Listing Rule IM–5315–2 allows a
company that has not previously had its
common equity securities registered
under the Act to list its common equity
securities on the Nasdaq Global Select
Market at the time of effectiveness of a
registration statement pursuant to which
the company itself will sell shares in the
opening auction on the first day of
trading on the Exchange.
Listing Rule IM–5315–2 provides that
in determining whether a company
listing in connection with a Direct
Listing with a Capital Raise satisfies the
Market Value of Unrestricted Publicly
Held Shares 11 for initial listing on the
Nasdaq Global Select Market, the
Exchange will deem such company to
have met the applicable requirement if
the amount of the company’s
Unrestricted Publicly Held Shares
before the offering along with the
market value of the shares to be sold by
the company in the Exchange’s opening
auction in the Direct Listing with a
Capital Raise is at least $110 million (or
$100 million, if the company has
stockholders’ equity of at least $110
million).
Listing Rule IM–5315–2 further
provides that, for this purpose, the
Market Value of Unrestricted Publicly
Held Shares will be calculated using a
price per share equal to the lowest price
of the price range disclosed by the
issuer in its effective registration
statement.
Because Nasdaq proposes to allow the
opening auction to price up to 20%
below the lowest price of the price range
established by the issuer in its effective
registration statement, Nasdaq proposes
to make a conforming change to Listing
Rule IM–5315–2 to provide that the
price used to determine such company’s
compliance with the Market Value of
Unrestricted Publicly Held Shares is the
price per share equal to the price that is
20% below the lowest price of the price
range disclosed by the issuer in its
effective registration statement as this is
the minimum price at which the
company could qualify to be listed.
Nasdaq will determine that the
company has met the applicable bid
11 See
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Listing Rules 5005(a)(23) and 5005(a)(45).
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Federal Register / Vol. 86, No. 123 / Wednesday, June 30, 2021 / Notices
price and market capitalization
requirements based on the same per
share price.
Any company listing in connection
with a Direct Listing with a Capital
Raise would continue to be subject to,
and required to meet, all other
applicable initial listing requirements,
including the requirements to have the
applicable number of shareholders and
at least 1,250,000 Unrestricted Publicly
Held Shares outstanding at the time of
initial listing, and the requirement to
have a price per share of at least $4.00
at the time of initial listing.12
Proposed Conforming Changes to Rules
4753(a)(3)(A) and 4753(b)(2)
Nasdaq proposes to amend Rules
4753(a)(3)(A) and 4753(b)(2) to conform
the requirements for disseminating
information and establishing the
opening price through the Cross in a
Direct Listing with a Capital Raise to the
proposed amendment to allow the
opening auction to price as much as
20% below the lowest price of the price
range established by the issuer in its
effective registration statement.
Specifically, Nasdaq proposes
changes to Rules 4753(a)(3)(A) and
4753(b)(2) to make adjustments to the
calculation of the Current Reference
Price, which is disseminated in the
Nasdaq Order Imbalance Indicator, in
the case of a Direct Listing with a
Capital Raise and for how the price at
which the Cross will execute. These
rules currently provide that where there
are multiple prices that would satisfy
the conditions for determining a price,
the fourth tie-breaker for a Direct Listing
with a Capital Raise is the price that is
closest to the lowest price of the price
range disclosed by the issuer in its
effective registration statement.
To conform these rules to the
modification of the Pricing Range
Limitation change, as described above,
Nasdaq proposes to modify the fourth
tie-breaker for a Direct Listing with a
Capital Raise, to use the price closest to
the price that is 20% below the lowest
price of the price range disclosed by the
issuer in its effective registration
statement.
2. Statutory Basis
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The Exchange believes that its
proposal is consistent with Section 6(b)
12 See Listing Rules 5315(f)(1), (e)(1) and (2),
respectively. Rule 5315(f)(1) requires a security to
have: (A) At least 550 total holders and an average
monthly trading volume over the prior 12 months
of at least 1,100,000 shares per month; or (B) at least
2,200 total holders; or (C) a minimum of 450 round
lot holders and at least 50% of such round lot
holders must each hold unrestricted securities with
a market value of at least $2,500.
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of the Act,13 in general, and furthers the
objectives of Section 6(b)(5) of the Act,14
in particular, in that it is designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general to protect
investors and the public interest.
Nasdaq believes that the proposed
amendment to modify the Pricing Range
Limitation is consistent with the
protection of investors because this
approach is not substantively different
from pricing of an IPO where an issuer
is permitted to price outside of the price
range disclosed by the issuer in its
effective registration statement in
accordance with the SEC’s Staff
guidance, as described above.
Specifically, Nasdaq believes that a
company listing in connection with a
Direct Listing with a Capital Raise can
specify the quantity of shares registered,
as permitted by Securities Act Rule 457,
and, when an auction prices outside of
the disclosed price range, use a Rule
424(b) prospectus, rather than a posteffective amendment, when either (i) the
20% threshold noted in Rule 430A is
not exceeded, regardless of the
materiality or non-materiality of
resulting changes to the registration
statement disclosure that would be
contained in the Rule 424(b) prospectus,
or (ii) when there is a deviation above
the price range beyond the 20%
threshold noted in Rule 430A if such
deviation would not materially change
the previous disclosure, in each case
assuming the number of shares issued is
not increased from the number of shares
disclosed in the prospectus. As a result,
Nasdaq will allow the Cross to take
place as low as 20% below the lowest
price of the price range disclosed by the
issuer in its effective registration
statement, but no lower, and so this is
the minimum price at which the
company could be listed. In addition, to
better inform investors and market
participants, Nasdaq will issue an
industry wide trader alert to inform the
participants that the auction could price
up to 20% below the lowest price of the
price range in the company’s effective
registration statement and specify what
that price is. Nasdaq will also indicate
in such trader alert whether or not there
is an upside limit above which the Cross
could not proceed, based on the
company’s certification, as described
above. If there is no upside limit,
Nasdaq will caution the market
participants about the use of market
orders explaining that unlike a limit
13 15
14 15
PO 00000
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
Frm 00106
Fmt 4703
order a market order can be executed at
any price determined by the Cross.
Nasdaq believes that the Commission
Staff has already concluded that such
pricing is appropriate for a company
conducting an initial public offering
notwithstanding it being outside of the
range stated in an effective registration
statement, and investors have become
familiar with this approach at least
since the Commission Staff last revised
Compliance and Disclosure
Interpretation 227.03 in January 2009.15
Nasdaq believes that the proposed
amendments to Listing Rule IM–5315–2
and Rules 4753(a)(3)(A) and 4753(b)(2)
to conform these rules to the
modification of the Pricing Range
Limitation is consistent with the
protection of investors. These
amendments would simply substitute
Nasdaq’s reliance on the price equal to
the lowest price of the price range
disclosed by the issuer in its effective
registration statement to the price that is
20% below such lowest price. In the
case of Listing Rule IM–5315–2, a
company listing in connection with a
Direct Listing with a Capital Raise
would still need to meet all applicable
initial listing requirements based on the
price that is 20% below the lowest price
of the price range disclosed by the
issuer in its effective registration
statement. In the case of the Rules
4753(a)(3)(A) and 4753(b)(2) such price,
which is the minimum price at which
the Cross will occur, will serve as the
fourth tie-breaker where there are
multiple prices that would satisfy the
conditions for determining the auction
price, as described above.
Nasdaq also believes that the
proposal, by eliminating an impediment
to companies using a Direct Listing with
a Capital Raise, will help removing
potential impediments to free and open
markets consistent with Section 6(b)(5)
of the Exchange Act while also
supporting capital formation.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed amendments would not
impose any burden on competition, but
would rather increase competition.
Nasdaq believes that allowing listing
venues to improve their rules enhances
competition among exchanges. Nasdaq
also believes that this proposed change
will give issuers interested in this
15 https://www.sec.gov/divisions/corpfin/
guidance/securitiesactrules-interps.htm.
Sfmt 4703
E:\FR\FM\30JNN1.SGM
30JNN1
Federal Register / Vol. 86, No. 123 / Wednesday, June 30, 2021 / Notices
pathway to access the capital markets
additional flexibility in becoming a
public company, and in that way
promote competition among service
providers, such as underwriters and
other advisors, to such companies.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the Exchange consents, the Commission
will: (a) By order approve or disapprove
such proposed rule change, or (b)
institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
jbell on DSKJLSW7X2PROD with NOTICES
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NASDAQ–2021–045 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NASDAQ–2021–045. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
VerDate Sep<11>2014
17:47 Jun 29, 2021
Jkt 253001
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NASDAQ–2021–045, and
should be submitted on or before July
21, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–13916 Filed 6–29–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92254; File No. SR–
NYSEAMER–2021–31]
Self-Regulatory Organizations; NYSE
American LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Rule 7.31E To
Add a Retail Order Modifier and the
NYSE American Equities Price List and
Fee Schedule To Cross Reference the
Retail Order Modifier
June 24, 2021.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on June 21,
2021, NYSE American LLC (‘‘NYSE
American’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
16 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
34819
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
rules to add new subparagraph (i)(4) to
Rule 7.31E and amend the NYSE
American Equities Price List and Fee
Schedule. The proposed rule change is
available on the Exchange’s website at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
rules to add new subparagraph (i)(4) to
Rule 7.31E (Orders and Modifiers) to
add a description of a Retail Order
modifier and to amend the Price List to
add a cross-reference to Rule 7.31E(i)(4).
Proposed Rule Change
The Exchange proposes to amend
Rule 7.31E to add new subparagraph
(i)(4) to provide for ETP Holders 4 to
designate an order with a retail modifier
(‘‘Retail Order’’). An order designated as
a ‘‘Retail Order’’ pursuant to proposed
Rule 7.31E(i)(4) would be eligible for the
Retail Order Rates specified on the
Exchange’s Price List.
Proposed Modifier for ‘‘Retail Orders’’
To define ‘‘Retail Orders,’’ the
Exchange proposes to amend Rule 7.31E
(Orders and Modifiers) to add a new
subsection (i)(4), titled ‘‘Retail
Modifier’’ to establish requirements for
Retail Orders on the Exchange. These
requirements are based on the
requirements to enter orders with
‘‘retail’’ modifiers for purposes of rates
1 15
PO 00000
Frm 00107
Fmt 4703
Sfmt 4703
4 See Rules 1.1E(m) (definition of ETP) & (n)
(definition of ETP Holder).
E:\FR\FM\30JNN1.SGM
30JNN1
]]>Agencies
[Federal Register Volume 86, Number 123 (Wednesday, June 30, 2021)]
[Notices]
[Pages 34815-34819]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-13916]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92256; File No. SR-NASDAQ-2021-045]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing of Proposed Rule Change To Modify Certain Pricing
Limitations for Companies Listing in Connection With a Direct Listing
Primary Offering
June 24, 2021.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on June 11, 2021, The Nasdaq Stock Market LLC (``Nasdaq'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I and II below, which Items have been prepared by the Exchange.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to modify certain pricing limitations for
companies listing in connection with a Direct Listing primary offering
in which the company will sell shares itself in the opening auction on
the first day of trading on Nasdaq.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, at
the principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
[[Page 34816]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Nasdaq recently adopted Listing Rule IM-5315-2 to permit a company
to list in connection with a primary offering in which the company will
sell shares itself in the opening auction on the first day of trading
on the Exchange (a ``Direct Listing with a Capital Raise''); \3\
created a new order type (the ``CDL Order''), which is used during the
Nasdaq Halt Cross (the ``Cross'') for the shares offered by the company
in a Direct Listing with a Capital Raise; and established requirements
for disseminating information, establishing the opening price and
initiating trading through the Cross in a Direct Listing with a Capital
Raise.\4\ For a Direct Listing with a Capital Raise, Nasdaq rules
currently require that the actual price calculated by the Cross be at
or above the lowest price and at or below the highest price of the
price range established by the issuer in its effective registration
statement (the ``Pricing Range Limitation'').
---------------------------------------------------------------------------
\3\ A Direct Listing with a Capital Raise includes situations
where either: (i) Only the company itself is selling shares in the
opening auction on the first day of trading; or (ii) the company is
selling shares and selling shareholders may also sell shares in such
opening auction.
\4\ See Securities Exchange Act Release No. 91947 (May 19,
2021), 86 FR 28169 (May 25, 2021) (the ``Approval Order'').
---------------------------------------------------------------------------
Nasdaq now proposes to modify the Pricing Range Limitation such
that a Direct Listing with a Capital Raise can be executed in the Cross
at a price that is at or above the price that is 20% below the lowest
price and at or below the price that is 20% above the highest price of
the price range established by the issuer in its effective registration
statement.\5\ In addition, Nasdaq proposes to modify the Pricing Range
Limitation such that a Direct Listing with a Capital Raise can be
executed in the Cross at a price above the price that is 20% above the
highest price of such price range, provided that the company has
certified to Nasdaq that such price would not materially change the
company's previous disclosure in its effective registration statement.
Nasdaq also proposes to make related conforming changes.
---------------------------------------------------------------------------
\5\ References in this proposal to the price range established
by the issuer in its effective registration statement are to the
price range disclosed in the prospectus in such registration
statement. Separately, as explained in more details below, Nasdaq
proposes to prescribe that the 20% threshold will be calculated
using the high end of the price range in the prospectus at the time
of effectiveness and may be measured from either the high end (in
the case of an increase in the price) or low end (in the case of a
decrease in the price) of that range.
---------------------------------------------------------------------------
Listing Rule IM-5315-2 requires that securities listing in
connection with a Direct Listing with a Capital Raise must begin
trading on Nasdaq following the initial pricing through the Cross,
which is described in Rules 4120(c)(9) and 4753. Rule 4120(c)(9)
requires that in the case of a Direct Listing with a Capital Raise, for
purposes of releasing securities for trading on the first day of
listing, Nasdaq, in consultation with the financial advisor to the
issuer, will make the determination of whether the security is ready to
trade.
Currently, in the case of the Direct Listing with a Capital Raise,
a security is not released for trading by Nasdaq unless the actual
price calculated by the Cross is at or above the lowest price and at or
below the highest price of the price range established by the issuer in
its effective registration statement.\6\ Specifically, under Rule
4120(c)(9)(B) Nasdaq shall release the security for trading only if:
(i) All market orders will be executed in the Cross; and (ii) the
actual price calculated by the Cross complies with the Pricing Range
Limitation.
---------------------------------------------------------------------------
\6\ See Rule 4120(c)(9)(B).
---------------------------------------------------------------------------
If there is insufficient buy interest to satisfy the CDL Order and
all other market orders, as required by the rule, or if the actual
price calculated by the Cross is outside the price range established by
the issuer in its effective registration statement, the Cross would not
proceed and such security would not begin trading. Nasdaq shall
postpone and reschedule the offering only if either or both such
conditions are not met. In such event, because the Cross cannot be
conducted, the Exchange would postpone and reschedule the offering and
notify market participants via a Trader Update that the Direct Listing
with a Capital Raise scheduled for that date has been cancelled and any
orders for that security that have been entered on the Exchange would
be cancelled back to the entering firms.
Proposed Change to Rule 4120(c)(9)
While many companies are interested in alternatives to the
traditional IPOs, based on conversations with companies and their
advisors Nasdaq believes that there may be a reluctance to use the
existing Direct Listing with a Capital Raise rules because of concerns
about the Pricing Range Limitation.
One potential benefit of a Direct Listing with a Capital Raise as
an alternative to a traditional IPO is that it could maximize the
chances of more efficient price discovery of the initial public sale of
securities for issuers and investors. Unlike an IPO where the offering
price is informed by underwriter engagement with potential investors to
gauge interest in the offering, but ultimately decided through
negotiations between the issuer and the underwriters for the offering,
in a Direct Listing with a Capital Raise the initial sale price is
determined based on market interest and the matching of buy and sell
orders in an auction open to all market participants. In that regard,
in the Approval Order the Commission stated that:
The opening auction in a Direct Listing with a Capital Raise
provides for a different price discovery method for IPOs which may
reduce the spread between the IPO price and subsequent market
trades, a potential benefit to existing and potential investors. In
this way, the proposed rule change may result in additional
investment opportunities while providing companies more options for
becoming publicly traded.\7\
---------------------------------------------------------------------------
\7\ See Approval Order, 86 FR at 28177.
A successful initial public offering of shares requires sufficient
investor interest. If an offering cannot be completed due to lack of
investor interest, there is likely to be a substantial amount of
negative publicity for the company and the offering may be delayed or
cancelled. The Pricing Range Limitation imposed on a Direct Listing
with a Capital Raise (but not on a traditional IPO) increases the
probability of such a failed offering because the offering cannot
proceed without some delay not only for the lack of investor interest,
but also if investor interest is greater than the company and its
advisors anticipated. In the Approval Order, the Commission noted a
frequent academic observation of traditional firm commitment
underwritten offerings that the IPO price, established through
negotiation between the underwriters and the issuer, is often lower
than the price that the issuer could have obtained for the securities,
based on a comparison of the IPO price to the closing price on the
first day of trading.\8\ Nasdaq believes that the price range in a
company's effective registration statement for a Direct Listing with a
Capital Raise would similarly be determined by the company and its
advisors and, therefore, there may be instances of offerings where the
price determined by the Nasdaq opening auction will exceed the highest
price of the price range in the company's effective registration
statement.
---------------------------------------------------------------------------
\8\ See Approval Order, footnote 91.
---------------------------------------------------------------------------
As explained above, under the existing rule a security subject to a
[[Page 34817]]
Direct Listing with a Capital Raise cannot be released for trading by
Nasdaq if the actual price calculated by the Cross is above the highest
price of the price range established by the issuer in its effective
registration statement. In this case, Nasdaq would have to cancel or
postpone the offering until the company amends its effective
registration statement. At a minimum, such a delay exposes the company
to market risk of changing investor sentiment in the event of an
adverse market event. In addition, as explained above, the
determination of the public offering price of a traditional IPO is not
subject to limitations similar to the Pricing Range Limitation for a
Direct Listing with a Capital Raise, which, in Nasdaq's view, could
make companies reluctant to use this alternative method of going public
despite its expected potential benefits.
Accordingly, Nasdaq proposes to modify the Pricing Range Limitation
such that in the case of the Direct Listing with a Capital Raise, a
security shall not be released for trading by Nasdaq unless the actual
price at which the Cross would occur is at or above the price that is
20% below the lowest price of the price range established by the issuer
in its effective registration statement and at or below the price that
is 20% above the highest price of the price range. In other words,
Nasdaq would release the security for trading, provided all other
necessary conditions are satisfied, even if the actual price calculated
by the Cross is outside the price range established by the issuer in
its effective registration statement; provided however that the actual
price cannot be more than 20% below the lowest price or more than 20%
above the highest price of such range; and the company specified the
quantity of shares registered, as permitted by Securities Act Rule 457,
as explained below. In addition, there would be no limitation on
releasing the security for trading at a price above the price that is
20% above the highest price of the price range established by the
issuer in its effective registration statement if the company has
certified to Nasdaq that such offering price would not materially
change the company's previous disclosure in its effective registration
statement.
Nasdaq believes that this approach is consistent with SEC Rule 430A
and question 227.03 of the SEC Staff's Compliance and Disclosure
Interpretations, which generally allow a company to price a public
offering 20% outside of the disclosed price range without regard to the
materiality of the changes to the disclosure contained in the company's
registration statement.\9\ Nasdaq believes such guidance also allows
deviation above the price range beyond the 20% threshold if such change
or deviation does not materially change the previous disclosure.
Accordingly, Nasdaq believes that a company listing in connection with
a Direct Listing with a Capital Raise can specify the quantity of
shares registered, as permitted by Securities Act Rule 457, and, when
an auction prices outside of the disclosed price range, use a Rule
424(b) prospectus, rather than a post-effective amendment, when either
(i) the 20% threshold noted in Rule 430A is not exceeded, regardless of
the materiality or non-materiality of resulting changes to the
registration statement disclosure that would be contained in the Rule
424(b) prospectus, or (ii) when there is a deviation above the price
range beyond the 20% threshold noted in Rule 430A if such deviation
would not materially change the previous disclosure, in each case
assuming the number of shares issued is not increased from the number
of shares disclosed in the prospectus. Consistent with the Commission's
Staff guidance on Rule 430A, Nasdaq proposes to prescribe that this 20%
threshold will be calculated using the high end of the price range in
the prospectus at the time of effectiveness and may be measured from
either the high end (in the case of an increase in the price) or low
end (in the case of a decrease in the price) of that range.
---------------------------------------------------------------------------
\9\ Securities Act Rule 457 permits issuers to register
securities either by specifying the quantity of shares registered,
pursuant to Rule 457(a), or the proposed maximum aggregate offering
amount. Nasdaq expects that companies selling shares through a
Direct Listing with a Capital Raise will register securities by
specifying the quantity of shares registered and not a maximum
offering amount. See also Compliance & Disclosure Interpretation of
Securities Act Rules #227.03 at https://www.sec.gov/divisions/corpfin/guidance/securitiesactrules-interps.htm.
---------------------------------------------------------------------------
Finally, given that, as proposed, there may be a Direct Listing
with a Capital Raise that could price outside the price range of the
company's effective registration statement and that there may be no
upside limit above which the Cross could not proceed, in each instance
of a Direct Listing with a Capital Raise, Nasdaq will issue an industry
wide trader alert \10\ to inform the market participants that the
auction could price up to 20% below the lowest price of the price range
in the company's effective registration statement and specify what that
price is. Nasdaq will also indicate in such trader alert whether or not
there is an upside limit above which the Cross could not proceed, based
on the company's certification, as described above. If there is no
upside limit, Nasdaq will caution the market participants about the use
of market orders explaining that unlike a limit order a market order
can be executed at any price determined by the Cross.
---------------------------------------------------------------------------
\10\ Trader alert is an industry wide subscription based free
service provided by Nasdaq.
---------------------------------------------------------------------------
Proposed Conforming Changes to Listing Rule IM-5315-2
Listing Rule IM-5315-2 allows a company that has not previously had
its common equity securities registered under the Act to list its
common equity securities on the Nasdaq Global Select Market at the time
of effectiveness of a registration statement pursuant to which the
company itself will sell shares in the opening auction on the first day
of trading on the Exchange.
Listing Rule IM-5315-2 provides that in determining whether a
company listing in connection with a Direct Listing with a Capital
Raise satisfies the Market Value of Unrestricted Publicly Held Shares
\11\ for initial listing on the Nasdaq Global Select Market, the
Exchange will deem such company to have met the applicable requirement
if the amount of the company's Unrestricted Publicly Held Shares before
the offering along with the market value of the shares to be sold by
the company in the Exchange's opening auction in the Direct Listing
with a Capital Raise is at least $110 million (or $100 million, if the
company has stockholders' equity of at least $110 million).
---------------------------------------------------------------------------
\11\ See Listing Rules 5005(a)(23) and 5005(a)(45).
---------------------------------------------------------------------------
Listing Rule IM-5315-2 further provides that, for this purpose, the
Market Value of Unrestricted Publicly Held Shares will be calculated
using a price per share equal to the lowest price of the price range
disclosed by the issuer in its effective registration statement.
Because Nasdaq proposes to allow the opening auction to price up to
20% below the lowest price of the price range established by the issuer
in its effective registration statement, Nasdaq proposes to make a
conforming change to Listing Rule IM-5315-2 to provide that the price
used to determine such company's compliance with the Market Value of
Unrestricted Publicly Held Shares is the price per share equal to the
price that is 20% below the lowest price of the price range disclosed
by the issuer in its effective registration statement as this is the
minimum price at which the company could qualify to be listed. Nasdaq
will determine that the company has met the applicable bid
[[Page 34818]]
price and market capitalization requirements based on the same per
share price.
Any company listing in connection with a Direct Listing with a
Capital Raise would continue to be subject to, and required to meet,
all other applicable initial listing requirements, including the
requirements to have the applicable number of shareholders and at least
1,250,000 Unrestricted Publicly Held Shares outstanding at the time of
initial listing, and the requirement to have a price per share of at
least $4.00 at the time of initial listing.\12\
---------------------------------------------------------------------------
\12\ See Listing Rules 5315(f)(1), (e)(1) and (2), respectively.
Rule 5315(f)(1) requires a security to have: (A) At least 550 total
holders and an average monthly trading volume over the prior 12
months of at least 1,100,000 shares per month; or (B) at least 2,200
total holders; or (C) a minimum of 450 round lot holders and at
least 50% of such round lot holders must each hold unrestricted
securities with a market value of at least $2,500.
---------------------------------------------------------------------------
Proposed Conforming Changes to Rules 4753(a)(3)(A) and 4753(b)(2)
Nasdaq proposes to amend Rules 4753(a)(3)(A) and 4753(b)(2) to
conform the requirements for disseminating information and establishing
the opening price through the Cross in a Direct Listing with a Capital
Raise to the proposed amendment to allow the opening auction to price
as much as 20% below the lowest price of the price range established by
the issuer in its effective registration statement.
Specifically, Nasdaq proposes changes to Rules 4753(a)(3)(A) and
4753(b)(2) to make adjustments to the calculation of the Current
Reference Price, which is disseminated in the Nasdaq Order Imbalance
Indicator, in the case of a Direct Listing with a Capital Raise and for
how the price at which the Cross will execute. These rules currently
provide that where there are multiple prices that would satisfy the
conditions for determining a price, the fourth tie-breaker for a Direct
Listing with a Capital Raise is the price that is closest to the lowest
price of the price range disclosed by the issuer in its effective
registration statement.
To conform these rules to the modification of the Pricing Range
Limitation change, as described above, Nasdaq proposes to modify the
fourth tie-breaker for a Direct Listing with a Capital Raise, to use
the price closest to the price that is 20% below the lowest price of
the price range disclosed by the issuer in its effective registration
statement.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\13\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\14\ in particular, in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general to protect investors and the public
interest.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Nasdaq believes that the proposed amendment to modify the Pricing
Range Limitation is consistent with the protection of investors because
this approach is not substantively different from pricing of an IPO
where an issuer is permitted to price outside of the price range
disclosed by the issuer in its effective registration statement in
accordance with the SEC's Staff guidance, as described above.
Specifically, Nasdaq believes that a company listing in connection with
a Direct Listing with a Capital Raise can specify the quantity of
shares registered, as permitted by Securities Act Rule 457, and, when
an auction prices outside of the disclosed price range, use a Rule
424(b) prospectus, rather than a post-effective amendment, when either
(i) the 20% threshold noted in Rule 430A is not exceeded, regardless of
the materiality or non-materiality of resulting changes to the
registration statement disclosure that would be contained in the Rule
424(b) prospectus, or (ii) when there is a deviation above the price
range beyond the 20% threshold noted in Rule 430A if such deviation
would not materially change the previous disclosure, in each case
assuming the number of shares issued is not increased from the number
of shares disclosed in the prospectus. As a result, Nasdaq will allow
the Cross to take place as low as 20% below the lowest price of the
price range disclosed by the issuer in its effective registration
statement, but no lower, and so this is the minimum price at which the
company could be listed. In addition, to better inform investors and
market participants, Nasdaq will issue an industry wide trader alert to
inform the participants that the auction could price up to 20% below
the lowest price of the price range in the company's effective
registration statement and specify what that price is. Nasdaq will also
indicate in such trader alert whether or not there is an upside limit
above which the Cross could not proceed, based on the company's
certification, as described above. If there is no upside limit, Nasdaq
will caution the market participants about the use of market orders
explaining that unlike a limit order a market order can be executed at
any price determined by the Cross.
Nasdaq believes that the Commission Staff has already concluded
that such pricing is appropriate for a company conducting an initial
public offering notwithstanding it being outside of the range stated in
an effective registration statement, and investors have become familiar
with this approach at least since the Commission Staff last revised
Compliance and Disclosure Interpretation 227.03 in January 2009.\15\
---------------------------------------------------------------------------
\15\ https://www.sec.gov/divisions/corpfin/guidance/securitiesactrules-interps.htm.
---------------------------------------------------------------------------
Nasdaq believes that the proposed amendments to Listing Rule IM-
5315-2 and Rules 4753(a)(3)(A) and 4753(b)(2) to conform these rules to
the modification of the Pricing Range Limitation is consistent with the
protection of investors. These amendments would simply substitute
Nasdaq's reliance on the price equal to the lowest price of the price
range disclosed by the issuer in its effective registration statement
to the price that is 20% below such lowest price. In the case of
Listing Rule IM-5315-2, a company listing in connection with a Direct
Listing with a Capital Raise would still need to meet all applicable
initial listing requirements based on the price that is 20% below the
lowest price of the price range disclosed by the issuer in its
effective registration statement. In the case of the Rules
4753(a)(3)(A) and 4753(b)(2) such price, which is the minimum price at
which the Cross will occur, will serve as the fourth tie-breaker where
there are multiple prices that would satisfy the conditions for
determining the auction price, as described above.
Nasdaq also believes that the proposal, by eliminating an
impediment to companies using a Direct Listing with a Capital Raise,
will help removing potential impediments to free and open markets
consistent with Section 6(b)(5) of the Exchange Act while also
supporting capital formation.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The proposed amendments would
not impose any burden on competition, but would rather increase
competition. Nasdaq believes that allowing listing venues to improve
their rules enhances competition among exchanges. Nasdaq also believes
that this proposed change will give issuers interested in this
[[Page 34819]]
pathway to access the capital markets additional flexibility in
becoming a public company, and in that way promote competition among
service providers, such as underwriters and other advisors, to such
companies.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will: (a) By order approve
or disapprove such proposed rule change, or (b) institute proceedings
to determine whether the proposed rule change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NASDAQ-2021-045 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2021-045. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of such filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NASDAQ-2021-045, and should be submitted
on or before July 21, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-13916 Filed 6-29-21; 8:45 am]
BILLING CODE 8011-01-P
