On December 8, 2025, the Securities and Exchange Commission (“SEC”) approved proposed rule changes submitted by The Nasdaq Stock Market LLC (“Nasdaq”) that exempt certain over-the-counter (“OTC”)-traded SPACs from the reverse merger rule and minimum average daily trading volume requirements. Citing a recent increase in the number of SPACs that were listed at the time of their IPO but later delisted, Nasdaq proposed these changes to ensure that de-SPAC transactions involving such OTC-traded SPACs are treated the same as those involving exchange-listed SPACs and that both are subject to the same rules applicable to initial public offerings (“IPOs”). The SEC’s approval includes amendments Nasdaq submitted on December 4 to the proposal it initially submitted on August 22.
The approved rule change applies to certain de-SPAC transactions involving SPACs that are currently listed or were previously listed on a national securities exchange and that allow public shareholders to redeem or tender their shares in connection with the transaction. These transactions must also involve a listing based on an effective Securities Act registration statement (referred to as a “Covered de-SPAC”). The approved proposal will carve Covered de-SPACs out of both the definition of “reverse merger” in Rule 5005(a)(39) and the minimum average daily trading volume listing standards under Rules 5315(e)(4), 5405(a)(4) and 5505(a)(5). The carveout from the definition of “reverse merger” replaces the previous carveout for “the acquisition of an operating company by a listed company satisfying the requirements of IM-5101-2.”
Rule 5110(c) imposes additional listing conditions on securities issued by companies formed by reverse mergers. This rule—which the approved proposal does not change—is called the reverse merger rule and was originally adopted to prevent “backdoor registrations” in which operating companies become Exchange Act-reporting companies with immediate access to public markets without any of the vetting involved in a typical IPO process. Because of the SEC’s recent adoption of rules aligning de-SPACs with traditional IPOs and the requirement in the approved proposal that Covered de-SPACs be conducted pursuant to an effective Securities Act registration statement and include a redemption opportunity, Nasdaq believes that a Covered de-SPAC provides sufficient opportunity for investors to make informed investment decisions about whether to redeem or remain invested prior to listing such that application of the reverse merger rule is not necessary.
The average daily trading volume listing standards—which require OTC-traded securities to have a minimum average daily trading volume of 2,000 shares for 30 trading days prior to listing—were adopted to ensure that when OTC-traded securities uplist to Nasdaq, an issuer of uplisted securities “will have sufficient investor base and trading interest to provide the depth and liquidity necessary to promote fair and orderly markets.” Based on Nasdaq’s reasoning that Covered de-SPACs are more akin to traditional IPOs than OTC uplistings and that a SPAC’s investor base typically changes following a de-SPAC, the approved proposal changes the listing standards of each of the Nasdaq Global Select, Global and Capital Markets to carve Covered de-SPACs out of the minimum average daily trading volume requirements.
It remains to be seen whether the NYSE will make similar changes to its listing standards.
The SEC’s release granted the approval on an accelerated basis allowing the rule changes to become effective prior to the 30th day following the publication of Nasdaq’s December 4 amendment in the Federal Register. A link to the SEC’s approval is available here.