As you know we previously reported that the Nasdaq has
proposed requiring reverse merged companies to trade on the over-the-counter
markets and meet other criteria for six months before being able to list on
Nasdaq. The initial proposal in April said that the 6-month wait would not be
required if a company was coming to Nasdaq with a firm commitment underwritten
public offering. Unfortunately in an amendment to their proposal earlier this
summer they summarily removed the exemption for public offerings.
In other developments, the NYSE Amex also put forth its
own seasoning proposal, which is very similar to the one requested by its
affiliate, the New York Stock Exchange, that we have previously reported on. It
requires a one-year seasoning, but provides an exemption from seasoning if the
company is coming to the Amex with a firm commitment public offering raising at
least $40 million completed at the time or or following a reverse merger. Note
that the NYSE and Amex proposals also exempt SPACs from listing there because
of their full SEC review and underwriter due diligence. The Nasdaq proposal
does not exempt SPACs.
It seems Nasdaq is ok with losing many exciting companies
who happen to go public in reverse mergers to the NYSE Amex or New York Stock
Exchange, even if they are raising $40 million in a public offering, by
requiring the six-month seasoning regardless of the size of a subsequent public
offering. This is obviously a real shame, as many exciting growth companies
would like to go to Nasdaq.
The truth is that the whole thing is a shame. The
problems faced by many reverse merger companies have also been faced by
companies that went through full IPOs (such as Longtop Financial, which went
public through Goldman Sachs and had Deloitte as their auditors). The problem
is not how these companies went public, but the companies themselves. Have I
said this enough?
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 &
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