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The SEC Approves Additional NYSE, Nasdaq and Amex Listing Requirements for Reverse Merger Companies

Yesterday the Securities and Exchange Commission approved additional listing requirements for companies that apply to list on the NYSE, Nasdaq or Amex following completion of a reverse merger with a shell company.

Under the new rules a reverse merger company will not be eligible for listing until it:

  • completes a one-year “seasoning period” by trading in the U.S. over-the-counter market or on another regulated U.S. or foreign exchange;
  • timely files all periodic reports required to be filed with the Commission, including at least one annual report containing audited financial statements for a full fiscal year commencing on a date that is after the date of the filing of all information required to be filed about the reverse merger; and
  • maintains a minimum closing stock price of at least $4 per share for a sustained period of time, but not less than 30 of the most recent 60 trading days, prior to the filing of its listing application .

In addition, each of the NYSE and Amex rules reserve the discretion to impose more stringent listing requirements in the case of a particular reverse merger company based on, among other things:

  • an inactive trading market in the company’s securities;
  • the existence of a low number of publicly held shares that are not subject to transfer restrictions;
  • if the company has not had a Securities Act registration statement subject to a comprehensive review by the Commission; or
  • if the company has disclosed that it has material weakness in its internal controls which have been identified by management and/or the company’s  independent auditors and has not yet implemented an appropriate corrective action plan.

Two Exceptions

There are two exceptions. A reverse merger company will not be subject to the additional listing requirements if it is applying to list its securities on NYSE, Nasdaq or Amex in connection with a  firm commitment underwritten public offering where the proceeds to the company will be at least $40 million and the offering occurs subsequent to or concurrently with the reverse merger.

Alternatively, if the reverse merger company satisfies the one-year “seasoning-period” and has filed at least four annual reports containing audited financial statements, then it may apply for listing under any one of the respective exchanges’ other initial listing standards.

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