The Nasdaq Stock Market ("Nasdaq") recently solicited comments from the public relating to proposed revisions to Nasdaq Stock Market Rule 5635(d), which requires shareholder approval in connection with certain equity private placements. The public comment period ended on 31 July 2017.
Rule 5635(d) sets forth the circumstances under which shareholder approval is required prior to an issuance of securities in connection with private placements when a transaction (other than a public offering) involves the sale, issuance or potential issuance by a Nasdaq-listed company of common stock (or securities convertible into or exercisable for common stock) equal to 20% or more of the common stock or voting power outstanding, if the offer price for such shares is less than the greater of the book or market value of the stock.
The proposed changes to the rule include:
- in the determination of market value, changing from a single day's closing bid price to a five-day average of closing prices;
- requiring the approval by either a committee of independent directors or a majority of the independent directors on the board, unless it is approved by the company's shareholders, of any transaction of more than 20% of the company's shares outstanding; and
- removing the book value requirement. If Nasdaq decides to proceed with these revisions, the proposal will then be subject to public notice and comment as part of the SEC's review and approval process.
Nasdaq's announcement is available at:
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