NASDAQ originally filed the proposed rule change with the SEC  requiring additional disclosure about companies that become public through reverse mergers because of the “extraordinary level of public attention” to listed companies that went public via a Reverse Merger pursuant to which an unlisted operating company becomes a public company by merging with a public shell.  The June 8, 2011 SEC Release N° 34-646331 replaces NASDAQ’a previous filing in order to eliminate the exception for a Reverse Merger that was also conducting a firm commitment, underwritten public offering. 

The new Release includes a definition of “Reverse Merger” that lists some of the factors to be taken into account when determining whether a company is a shell, including whether it falls within the definition of Rule 12b-2, the proportion of active to passive assets , whether the company generates revenues and, if so whether such revenues are actively or passively generated,  the relationship of expenses to revenues, number of active employees, how long the company has been without material business operations and whether there has been a public announcement concerning future activities. 

The amended proposed rule change retains the “seasoning requirements” providing that, before such a company can apply to be listed it must have (i) traded for at least 6 months on the OTC market, another national securities exchange or a foreign exchange following filing concerning the transaction including audited financials and (ii) maintained a Bid Price of at least $4 per share on at least 30 of the preceding 60 trading days.  In addition, the company must have filed financials for at least 6 months with the relevant authority.