NYSE Joins Nasdaq in Proposing “Seasoning” After Reverse Mergers

Shoe #2 drops with a thud. The NYSE Euronext announced earlier this month that, like the Nasdaq, it wants reverse merger companies to trade on the over-the-counter market before being allowed to apply to uplist. Luckily, like Nasdaq, it exempts companies coming to the NYSE with a firm commitment underwriting, which is frankly how most companies we work with get there. So it's not of much practical concern for most of us. But still it is another slap in the face of the RM industry.

The NYSE proposal also goes further than Nasdaq in requiring a full year of "seasoning" as opposed to Nasdaq's proposal of six months. Other parts of the proposal: maintain "for a sustained period" a stock price of $4.00 while trading over-the-counter and make all your SEC filings for one year.

Another interesting feature - in defining what companies completed reverse mergers subject to seasoning they say it's a business combination with a shell. But their proposed definition of shell is broader than the SEC rule ( their definition is a company with no or nominal operations and no or nominal assets other than cash). They say it's a shell if it meets that SEC definition but they may say that others are shells depending on other factors including how active the assets were, what revenues the company had, etc.

More on this in another post.

For additional insights on reverse mergers, SPACs, other alternatives to traditional initial public offerings, the small and microcap markets and the economy, visit the Reverse Merger and SPAC Blog  by David N. Feldman, Esq., Partner of Richardson & Patel LLP.

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