Proposed Changes to Nasdaq Shareholder Approval Requirements: Nasdaq Proposes to Eliminate the Requirement for Shareholder Approval of 20% Stock Issuances at a Price Less Than Book Value but Greater Than Market Value and to Change the Definition of “Market Value”

Sullivan & Cromwell LLP - February 12, 2018
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On January 30, 2018, Nasdaq Stock Market LLC (“Nasdaq”) filed notice with the SEC of a proposed rule change to Nasdaq Listing Rule 5635(d).  This proposed change deletes the reference to book value in the threshold price of “less than the greater of book or market value” for the purposes of the shareholder approval required for issuances of common stock equal to 20% or more of the outstanding stock or voting power.  The proposed rule change also changes the definition of “market value” from the closing bid price to “the lower of (i) the closing price (as reflected on or (ii) the average closing price of the common stock (as reflected on for the five trading days immediately preceding the signing of the binding agreement.”  Public comments on the proposed rule change will be due within 21 days after publication of the proposed rule change in the Federal Register.