On July 31, 2017, the NYSE amended its proposal, originally issued on March 13, 2017 and then withdrawn on July 19, 2017, to modify its listing qualifications to facilitate direct offerings. 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 amended proposal retains the changes to Footnote (E) included in the original proposal, including, among others, changes to (1) explicitly provide that these provisions apply to companies listing upon effectiveness of a Form 10 or 20-F without a concurrent Securities Act registration and (b) upon effectiveness of a resale registration statement, and (2) 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 amended proposal also includes the following new changes:
- Amending Footnote (E) to establish criteria for assessing the independence of a valuation agent;
- Amending NYSE Rule 104(a)(2) to specify the role of a financial adviser to an issuer that is listing under Footnote (E) and that has not had any recent trading in a Private Placement Market;
- Amending NYSE Rule 123D to provide that the NYSE may declare a regulatory halt in a security that is the subject of: (1) an IPO on the NYSE; or (2) an initial pricing on the NYSE of a security that has not been listed on a national securities exchange or traded in the over-the-counter market pursuant to FINRA Form 211 immediately prior to the initial pricing.
The SEC has until September 18, 2017 to approve, disapprove or institute proceedings for the amended proposal.
The independence criteria and the provisions addressing the role of a financial advisor added to this amended NYSE proposal would seem to provide a roadmap for any issuer seeking to undertake a direct listing, perhaps as an alternative to a traditional IPO, and that might have engaged or is considering engaging advisers to assist the issuer with the direct listing process.