Nasdaq's Temporary Relief from Price-Based Continued Listing Standards for Companies Affected by COVID-19 Crisis
April 21, 2020
By Serge V. Pavluk
At the end of last week, Nasdaq filed with the Securities and Exchange Commission (SEC) the proposed rule change to offer temporary relief to the Nasdaq-listed companies to the extent their stock prices and market values drop below the required minimums under the Nasdaq continued listing standards.
In its rule change proposal, Nasdaq stated that it was seeing an increase in the number of the Nasdaq-listed companies whose securities have been becoming non-compliant with the price-based continued listing standard due to the market uncertainty caused by the COVID-19 pandemic. Per Nasdaq, the decline in general investor confidence has resulted in depressed pricing for companies that otherwise remain suitable for continued listing on Nasdaq. Nasdaq also believed that it is difficult under the current conditions for companies that are already non-compliant with these requirements to take action to regain compliance.
The SEC has approved this Nasdaq proposed rule change, effective immediately. Under this temporary relief rule, the Nasdaq-listed companies get more time to regain compliance with price-based continued listing standards. Such standards set the requisite minimum bid price (i.e., a minimum bid price of $1 per share for a 30-day period) and the market value of such companies’ public float (i.e., publicly held shares) depending on the listing standard the company qualified for.
Specifically, between the effective date of this temporary relief rule through June 30, 2020 (the tolling period), Nasdaq will continue to monitor the price-based continued listing standards and notify the listed companies about any non-compliance with the applicable requirement. Subject to the applicable Nasdaq and SEC rules, such notified companies would still be required to publicly announce the non-compliance.
After the tolling period ends, such listed companies will be entitled to the balance of any pending compliance period under the Nasdaq rules in effect as of the end of the tolling period (i.e., July 1, 2020) to come back into compliance. Accordingly, the companies that first become non-compliant during the tolling period will have 180 days from July 1, 2020 to regain compliance. To the extent a delisting process of a particular company that failed to comply with the one or more price-based continued listing standard was already underway before the tolling period, such process would resume after the expiration of the tolling period at the same stage it was in when the tolling period started.