The Securities and Exchange Commission has approved a rule allowing special purpose acquisition companies, or SPACs, to list on NASDAQ. SPACs, also known as blank check companies, are companies without existing business operations that are formed for the purpose of consummating an acquisition of a tobe- identified business. Previously, NASDAQ did not list securities of an issuer without a specific business plan or that indicated that its plan was to engage in a merger or acquisition with an unidentified company.

Earlier in the summer, the New York Stock Exchange also adopted a rule to permit the listing of SPACs on the NYSE. Prior to the adoption of the NYSE rule change, the American Stock Exchange was the only listing option for domestically traded SPACs. The new NASDAQ rule rounds out the listing alternatives for SPACs.

In order to list on the NASDAQ Global Select Market, the publicly held shares of the SPAC must have an aggregate market value of at least $70 million. In contrast, in order to list on the NYSE, a SPAC’s publicly held shares must have a market value of at least $200 million. A SPAC also may list on the NASDAQ Global Market or NASDAQ Capital Market, both of which have more liberal listing requirements than the NASDAQ Global Select Market.

To list on NASDAQ, a SPAC also must satisfy the following SPAC-specific requirements, as well as NASDAQ’s initial listing standards applicable to all issuers:

  • At least 90% of the gross proceeds from the IPO and any other concurrent sales of the SPAC’s equity securities must be placed in a deposit account, which may be a trust account maintained by an independent trustee, an escrow account maintained by an insured depository institution or a separate bank account established by a registered broker or dealer;
  • Within 36 months of the effectiveness of the IPO registration statement or any shorter period specified therein, the SPAC must complete one or more business combinations with an aggregate fair market value of at least 80% of the value of the deposit account at the time of the agreement to enter into the initial business combination;
  • Each business combination must be approved by both a majority of the SPAC’s independent directors and the holders of a majority of the shares of the SPAC’s common stock; and
  • Until the SPAC has completed business combinations with an aggregate fair market value equal to at least 80% of the value of the deposit account at the time of the initial business combination, each public shareholder voting against a business combination must be given the option to convert its shares into a pro rata portion of the aggregate amount then in the deposit account if the business combination is consummated; however, the SPAC may limit the maximum number of shares with respect to which any shareholder or group may exercise conversion rights, except that the limit cannot be set at less than 10% of the shares sold in the IPO.

Following each business combination, the resulting entity must meet NASDAQ’s initial listing standards to remain listed.

A copy of the SEC’s order approving the NASDAQ rule change is available at: http://www.sec.gov/rules/sro/nasdaq/2008/34-58228.pdf