A number of public companies have experienced dramatic fluctuations in their stock price, trading volume and market capitalization as a result of the recent market downturn triggered by the COVID-19 pandemic. For registrants concerned about steep declines in their day-to-day market cap in this volatile environment and how the volatility may impact their status as a large accelerated, accelerated or non-accelerated (including a small reporting company or SRC) filer, here are a few reminders:
- The determination of filer status is made at the end of the company’s fiscal year and will take effect on the succeeding fiscal year. Hence, an accelerated filer that meets, at the end of fiscal year 2020, the criteria for a large accelerated filer should indicate in the 2020 Form 10-K it files in 2021 that it is now a large accelerated filer.
- However, the public float requirement in the filer status criteria is measured and calculated as of the last business day of the issuer’s most recently completed second fiscal quarter. Public float means the aggregate worldwide market value of the voting and non-voting common equity held by the issuer’s non-affiliates. So, in our example, for companies with a calendar fiscal year, that public float test date would mean June 30, 2020. Under the public float requirements in Exchange Act Rule 12-b2, an issuer must have a public float of $75 million or more, but less than $700 million, to be an accelerated filer; or more than $700 million to be a large accelerated filer. It would be an SRC if it had (i) a public float of less than $250 million or (ii) had annual revenues of less than $100 million and either (x) no public float or (y) a public float of less than $700 million. In each of these cases, the public float is measured on the last business day of the issuer’s second fiscal quarter.
- The transition thresholds for becoming a non-accelerated filer and entering and exiting large accelerated and accelerated filer status have been recently amended by the SEC, but the public float requirement is still measured on the last business day of the second fiscal quarter. Once an issuer becomes an accelerated filer, it will remain an accelerated filer unless its public float was less than $60 million as of such measurement date. A large accelerated filer will transition to either an accelerated filer or a non-accelerated filer once its public float falls below $560 million as of such measurement date.
For more information on the recent SEC amendments to the definitions of accelerated filer and large accelerated filer, please see our blog post and Legal Update.