SEC approves revisions to NYSE and Nasdaq minimum price regulations
In January 2025, modifications to the minimum bid price adherence regulations for corporations listed on the New York Stock Exchange (NYSE) and the Nasdaq Stock Market (Nasdaq) were ratified by the Securities and Exchange Commission (SEC). These revisions, aimed at curtailing the dependence on reverse stock splits and boosting market stability, introduce tougher implementation mechanisms that could have a significant impact on companies at risk of being delisted. This should prompt public companies to pay heed to the main revisions and confirm that their compliance strategies are aligned with the new structure.
Critical Points for NYSE Issuers
The NYSE has enacted more rigorous guidelines under Section 802.01C of its Listed Company Manual. According to the revised norms, NYSE-listed companies are required to sustain an average closing price of at least $1.00 per share over 30 consecutive trading days. Previously, firms that fell below this benchmark were given a six-month grace period to regain compliance. The recent modifications, however, have introduced additional constraints.
Restrictions on Reverse Stock Splits: Any entity that has undergone a reverse stock split in the past year or has implemented multiple reversals in the preceding two years at a combined ratio of 200-to-1 or higher will not receive an extension if the share price dips below $1.00. In such scenarios, the NYSE will promptly initiate suspension and delisting procedures.
Prohibition of Selected Reverse Stock Splits: If a company executes a reverse stock split that would cause it to dip below the NYSE ongoing listing mandates of Section 802.01A of the Listed Company Manual, it will no longer be allowed to proceed with such an action. In such instances, the regular compliance methods will not be applicable, resulting in an immediate suspension and delisting.
Critical Points for Nasdaq Issuers
Nasdaq-listed companies are mandated to uphold a minimum bid price of $1.00 per share and comply with Nasdaq Listing Rule 5810(c)(3)(A). Previously, entities that failed to meet this criterion for 30 consecutive business days were awarded a 180-day grace period to rectify the situation, along with a probable 180-day extension upon meeting particular conditions. This extension would automatically forestall any suspension and delisting measures, permitting the company’s securities to continue trading on Nasdaq while the appeal was pending. Nonetheless, the recent amendments bring forth several more stringent guidelines.
Automatic Trading Suspension After the Second Compliance Period: Businesses that fail to meet the minimum bid price prerequisite after two successive 180-day grace periods will be instantly suspended from trading. The subsequent suspension and looming prospect of delisting often have detrimental effects on the stock price and liquidity. Seeking a hearing will not halt the suspension, resulting in the company’s securities being traded over-the-counter during any appeal proceedings. To maintain compliance, the company’s closing bid price must remain at or above $1.00 for at least 10 consecutive business days, unless authorized by Nasdaq to extend this duration.
In addition, Nasdaq has strengthened its restrictions concerning reverse stock splits by extending the notification period and incorporating more rigorous compliance measures. Under the revised Nasdaq Listing Rule 5250(e)(7) and IM-5250-3, firms are now obligated to submit a detailed Company Event Notification Form at least 10 days before the proposed market effective date — a leap from the previous five-business-day stipulation. Failure to adhere to this requirement will result in a trading cessation. The notification form should contain details such as the new CUSIP number, DTC eligibility confirmation, approval dates by the board and stockholders, reverse stock split ratio, and a draft of the mandatory public disclosure to be published two business days before the effective date.
It is imperative for companies to synchronize their actions with DTC, Nasdaq, and transfer agents in the correct sequence to adhere to the 10-calendar-day rule and steer clear of any trading disruptions.
In conclusion, the SEC’s endorsement of these rule modifications indicates a more stringent approach toward minimum price compliance and delisting hazard management. These alterations are meant to discourage excessive reliance on reverse stock splits and ensure that companies adhere to sustainable financial and operational strategies rather than temporary stock price escalations. Businesses in the public domain should contemplate adopting the following measures.
