On July 2, 2020, the New York Stock Exchange (the “NYSE”) extended the temporary waiver to its shareholder approval requirements for certain related party and 20% equity issuances listed in Section 312.03 of the NYSE Listed Company Manual. Originally set to expire on June 30, 2020, the waiver is now extended through September 30, 2020.
In short, the NYSE will continue to waive the shareholder vote requirements applicable to 20% equity issuances by permitting, without a shareholder vote, all private placements for cash so long as the price in such transaction is greater than or equal to the Minimum Price.1 The waiver does not impact the existing NYSE rule requiring shareholder approval for any issuance of stock that would result in a change of control of the issuer.2 The waiver has the effect of permitting an investment by a single investor who may acquire more than 5% of the outstanding shares in a 20% equity issuance, as long as the price in such transaction is at or above the Minimum Price.
For a full summary of the waiver and the conditions for its use, please refer to our May alert.
The NYSE extended the waiver due to the ongoing economic disruption and uncertainty some listed companies continue to face as a result of the COVID-19 pandemic, despite the fact that equity indices have recovered from much of their precipitous decline in mid-March. The NYSE noted that since the implementation of the waiver, a number of listed companies have completed capital raising transactions that would not have been possible without the waiver.
As of July 14, 2020, the Nasdaq Stock Market LLC has not yet extended its temporary exception to its similar shareholder approval rules that was initially available through June 30, 2020.
1Minimum Price is defined as the lower of: (i) the official closing price of the issuer’s stock on the Exchange as reported to the Consolidated Tape immediately preceding the signing of a binding agreement to issue the securities; or (ii) the average official closing price for the five trading days immediately preceding the signing of the binding agreement.
2NYSE 312.03(d). While there is no definition of “change of control” in the NYSE Listed Company Manual, a change of control is generally considered to be triggered by an issuance of 1/3rd or more of the outstanding common stock or voting power measured after giving effect to the transaction.
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