On October 31, 2018, the NYSE filed a proposed amendment to the Listed Company Manual to modify the price requirements for purposes of determining whether shareholder approval is required for certain issuances of securities. These proposed amendments mirror the recent Nasdaq changes. The new NYSE rule would replace the “market value” test with a new definition known as “Minimum Price.” The Minimum Price would be defined as the lower of (i) the closing price of the issuer’s common stock immediately before the execution of the transaction agreement and (ii) the average closing price of the issuer’s common stock during the five days immediately preceding the transaction agreement. Under the proposal, shareholder approval would be required for transactions that are priced below the Minimum Price. The NYSE proposal eliminates the requirement for shareholder approval of issuances at a price less than book value but greater than market value. The proposed change aligns with Nasdaq’s recent amendment that eliminates “book value” in the determination of whether shareholder approval is needed. A copy of the proposed NYSE rule can be found here.
As we previously blogged, The Nasdaq Stock Market filed with the Securities and Exchange Commission an amendment to its shareholder vote rule, often referred to as the 20% rule. The amendment was recently approved by the Commission. The amendments eliminate “book value” in the determination of what constitutes a dilutive transaction. Shareholder approval is required in connection with a 20% issuance at a price less than the Minimum Price. A 20% issuance is a transaction other than a public offering that involves the sale, issuance or potential issuance of a listed company’s common stock (or securities convertible or exercisable for common stock) that alone or together with sales by certain control persons equal 20% or more of the common stock or 20% or more of the voting power outstanding before the issuance. The Minimum Price is a price that is the lower of the closing price immediately preceding the signing of the definitive agreement or the average closing price for the five trading days immediately preceding the signing of that agreement. While the amendment is limited and does not modify or affect other aspects of Rule 5635, which still requires shareholder approval in many instances, it is still helpful for listed companies.