This reinstatement of these requirements will follow Nasdaq's emergency moratorium on the enforcement of the minimum bid price and market value of public float requirements, which is scheduled to expire on January 2, 2002. This temporary relief was granted in response to extraordinary market conditions following the tragedy of September 11, to allow companies to focus on running their businesses, rather than on meeting these two listing requirements.
After careful examination, Nasdaq believes that minimum bid price and market value of public float continue to be useful requirements. Therefore, these requirements will be reinstated and not reduced.
Additionally, Nasdaq believes that the current 90-day grace period for Nasdaq National Market companies to regain compliance with the market value of public float and minimum bid price requirements are appropriate and commensurate with the stature of that market. Therefore, Nasdaq will maintain these requirements without adjustment.
Nasdaq also considered that listing standards for SmallCap companies are generally designed to be more flexible than those of the National Market. However, this has not been the case with respect to the minimum bid price requirement. As such, National Market issuers with bid price deficiencies may be forced to go directly to an unlisted, less transparent market, such as the OTC Bulletin Board. Given this, Nasdaq proposes a more flexible bid price grace period for the SmallCap market. The proposal would allow companies up to one year to implement turnaround plans to regain compliance with the requirement, while remaining on a well-regulated and transparent market.
Helen Scott, co-chair of the Nasdaq Listing and Hearing Review Council, commented: "If a company's stock price goes under a dollar, the company knows best what kinds of transactions will enhance its business and financial stability, many of which may take longer than 90 days to complete. Dropping a stock from the Nasdaq National Market directly onto a less transparent, non-Nasdaq market, hurts companies and their stockholders, and may trigger defaults in debt covenants or preferred stock. This proposal allows a company to continue to trade on the SmallCap market for a longer period, so that it can secure and close on new financing or execute another turnaround plan."
Said Glenn Oxner, co-chair of the NLHRC: "Bid price has proven to be a good indicator of a company's long term viability. Nasdaq was the first market to recognize this, when it originally implemented this requirement. The Nasdaq National Market will continue to have the most stringent bid-price requirement of the U.S. markets, while a more flexible version of this requirement will be maintained in the SmallCap market."
Details of the proposed adjustments to the SmallCap market grace period are as follows:
- Extend the 90-day grace period on the SmallCap market to 180 days. Following this grace period, issuers that demonstrate compliance with the core initial listing standards of the SmallCap market - that is, either net income of $750,000, stockholders' equity of $5 million or market capitalization of $50 million - will be afforded an additional 180-day grace period within which to regain compliance.
- If a National Market issuer phases down to the SmallCap market at the expiration of the 90-day National Market grace period, it will be afforded the SmallCap grace periods noted above.
- Former National Market issuers that demonstrate compliance with the $1 bid-price requirement for 30 consecutive trading days prior to the expiration of all SmallCap grace periods, as well as all National Market maintenance requirements (with the exception of bid price), at all times following their phase-down to SmallCap, would be eligible to phase-up to the National Market pursuant to the maintenance criteria.
-
In order to evaluate the effectiveness of these changes, Nasdaq plans to implement this proposal on a pilot basis until December 31, 2003.
The Nasdaq Stock Market lists over 4,100 companies and trades more shares per day than any other U.S. market. For more information about Nasdaq, visit the Nasdaq Web site at www.nasdaq.com or the Nasdaq NewsroomSM at www.nasdaqnews.com.
