On March 13, 2017, the NYSE issued a proposed rule to modify the provisions regarding the qualification of companies listing on the NYSE to allow for a listing without an IPO. Section 102.01B of the NYSE Listed Company Manual currently recognizes that some companies that have not previously registered their common equity securities under the Exchange Act, but which have sold common equity securities in a private placement, may wish to list those common equity securities on the NYSE at the time of effectiveness of a resale registration statement filed solely for the resale of the securities held by selling stockholders. Footnote (E) of Section 102.01B currently provides that the NYSE will exercise its discretion to list these companies by determining that a company has met the $100 million aggregate market value of publicly-held shares requirement based on a combination of both (1) an independent third-party valuation of the company (the “Valuation”) and (ii) the most recent trading price for the company’s common stock in a trading system for unregistered securities operated by a national securities exchange or a registered broker-dealer (a “Private Placement Market”). The NYSE then attributes a market value of publicly-held shares to the company equal to the lesser of (1) the value calculable based on the Valuation and (2) the value calculable based on the most recent trading price in a Private Placement Market.
Although Footnote (E) provides for a company NYSE listing upon effectiveness of a resale registration statement, it currently does not provide for a company listing in connection with the effectiveness of an Exchange Act registration statement in the absence of an IPO or other Securities Act registration. However, a company can become an Exchange Act registrant without a concurrent public offering by filing with the SEC a Form 10 or an annual report (such as a Form 10-K or Form 20-F).
The proposed rule would amend Footnote (E) to explicitly provide that it applies to companies listing (1) upon effectiveness of an Exchange Act registration statement without a concurrent Securities Act registration and (2) upon effectiveness of a resale registration statement. The proposed rule would also amend Footnote (E) to provide an exception to the Private Placement Market trading requirement for companies with a recent Valuation available indicating at least $250 million in market value of publicly-held shares. The valuation used for this purpose would need to be provided by an entity that has significant experience and demonstrable competence in the provision of these valuations.
This approach could be of significant interest for issuers that have completed 144A equity offerings, which are still popular among REITs, for issuers that have completed numerous private placements and have VC or PE investors that need liquidity, and for issuers, including foreign issuers, that are well-funded and do not need a capital raise through an IPO, but would still like to have their securities listed or quoted on a securities exchange.
The proposed rule is available at: https://www.sec.gov/rules/sro/nyse/2017/34-80313.pdf.