Tuesday, March 13, 2012

New Listing Market May Provide Opportunity for Growing Companies

A new listing market owned by NASDAQ is expected to launch later this year, providing early-stage and smaller companies a way to expand visibility and financing opportunities. Approved by the SEC in 2011, the “BX Venture Market” will have lower quantitative (financial) listing standards than major national exchanges, but similar qualitative, corporate governance standards—giving growing companies that are willing to comply with the requirements a transparent platform to reach investors and utilize superior trading technology.
The BX Venture Market is targeting companies trading on the OTC or “pink sheets” market, those that have been or will be delisted by another market for failure to meet that market’s quantitative standards, and smaller, less-liquid companies looking for capital financing opportunities or an exit for initial investors. The new market will help delisted companies, specifically, from leaving the exchange world all together, and may allow institutional shareholders to continue to hold their shares. Companies will not be required to have a majority of independent directors like other current exchanges, will not need to comply with the 20% shareholder approval rule for private placement issuances, and will not be subject to trade-through rules. BX Venture Market companies will, however, still be subject to the SEC’s penny stock rules and, more significantly, will have to comply with state-by-state Blue Sky requirements.
To qualify for an initial listing in this new market, a company must have:
·       At least 200,000 publicly held shares
·       At least 200 public shareholders
·       At least $2M market value of listed securities
·       Minimum of 2 market makers
·       A minimum initial listing price of $1.00 per share for securities not previously listed on national securities exchange, or $0.25 per share for securities previously listed on a national exchange
·       An independent audit committee of at least 3 members

Companies who have not previously listed on a national securities exchange must also have:

·       Either $1M stockholders’ equity or $5M total assets
·       At least a 1-year operating history
·       A plan to maintain sufficient working capital for at least 12 months after listing

In terms of more qualitative standards, a listed class of securities in the BX Venture Market must be registered under Section 12(b) of the Exchange Act. A company must be current in its Exchange Act (quarterly, annual, and periodic) filings, have independent directors make or recommend compensation decisions for executive officers, and hold annual shareholder meetings.  

Although the new market has not yet officially launched, companies interested in being listed will be able to submit applications via NASDAQ’s online listing center before the launch date. Upon submission of an application, the NASDAQ listing staff will verify the qualifications listed above and conduct a public interest review of the application, including a background check of the company and affiliated individuals and a review of a company’s proxy disclosures and other SEC filings.

Whether the new exchange is a boon for smaller public companies or accelerates the market for smaller initial public offerings remains to be seen. For more information, visit the official BX Venture Market faq

A Post by Karen Wenzel, Guest Blogger

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