[Federal Register Volume 86, Number 49 (Tuesday, March 16, 2021)]
[Notices]
[Pages 14508-14511]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-05345]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91294; File No. SR-NASDAQ-2020-062]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 
Notice of Filing of Proposed Rule Change, as Modified by Amendment, No. 
1, To Amend Listing Rules Applicable to Special Purpose Acquisition 
Companies Whose Business Plan is To Complete One or More Business 
Combinations

March 10, 2021.
    On September 3, 2020, The Nasdaq Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend its listing rules to permit companies 
whose business plan is to complete one or more business combinations 
(``SPACs'' or ``Acquisition Companies'') 15 calendar days following the 
closing of a business combination to demonstrate that the SPAC has 
satisfied the applicable round lot shareholder requirement. The 
proposed rule change was published for comment in the Federal Register 
on September 22, 2020.\3\ On November 4, 2020, pursuant to Section 
19(b)(2) of the Exchange Act,\4\ the Commission designated a longer 
period within which to approve the proposed rule change, disapprove the 
proposed rule change, or institute proceedings to determine whether to 
disapprove the proposed rule change.\5\ On December 16, 2020, the 
Commission instituted proceedings under Section 19(b)(2)(B) of the Act 
\6\ to determine whether to approve or disapprove the proposed rule 
change.\7\ On February 25, 2021, the Exchange filed Amendment No. 1 to 
the proposed rule change, which superseded the proposed rule change as 
originally filed, and is described in Items I and II below, which Items 
have been prepared by the Exchange. The Commission is publishing this 
notice to solicit comments on the proposed rule change, as modified by 
Amendment No. 1, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 89897 (September 16, 
2020), 85 FR 59574. Comments received on the proposal are available 
on the Commission's website at: https://www.sec.gov/comments/sr-nasdaq-2020-062/srnasdaq2020062.htm.
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 90340, 85 FR 71704 
(November 10, 2020). The Commission designated December 21, 2020, as 
the date by which it should approve, disapprove, or institute 
proceedings to determine whether to disapprove the proposed rule 
change.
    \6\ 15 U.S.C. 78s(b)(2)(B).
    \7\ See Securities Exchange Act Release No. 90682, 85 FR 83113 
(December 16, 2020).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend listing rules applicable to 
companies whose business plan is to complete one or more business 
combinations (the ``Original Proposal''). The Exchange is filing this 
proposal (``Amendment No. 1'') to amend the Original Proposal. 
Amendment No. 1 supersedes the

[[Page 14509]]

Original Proposal in its entirety to add an additional disclosure 
requirement.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Nasdaq is filing this amendment to SR-NASDAQ-2020-062, which was 
published for comment by the Commission on September 16, 2020.\8\ The 
original proposal would allow certain acquisition companies listed 
under IM-5101-2 with a 15-day period after closing a business 
combination to provide evidence that the combined company satisfied the 
round lot shareholder requirement for initial listing at the time of 
the business combination. This Amendment No. 1 would require a company 
relying on this 15-day period to file a Form 8-K, were required by SEC 
rules, or issue a press release noting that the company is relying upon 
the additional 15 calendar days available under Nasdaq rules to 
demonstrate compliance.
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    \8\ Securities Exchange Act Release No. 99897 (September 22, 
2020), 85 FR 59574 (September 16, 2020).
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    In 2009, Nasdaq adopted additional listing requirements for a 
company whose business plan is to complete an initial public offering 
and engage in a merger or acquisition with one or more unidentified 
companies within a specific period of time (``Acquisition 
Companies'').\9\ Such a company is required to keep at least 90% of the 
proceeds from its initial public offering in an escrow account and, 
until the company has completed one or more business combinations 
having an aggregate fair market value of at least 80% of the value of 
the escrow account, must meet the requirements for initial listing 
following each business combination.\10\ If a shareholder vote on the 
business combination is held, public shareholders voting against a 
business combination must have the right to convert their shares of 
common stock into a pro rata share of the aggregate amount then in the 
escrow account (net of taxes payable and amounts distributed to 
management for working capital purposes) if the business combination is 
approved and consummated.\11\ If the combined company does not meet the 
initial listing requirements following a business combination, Nasdaq 
Staff will issue a Staff Delisting Determination under Nasdaq Rule 
5810.
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    \9\ Securities Exchange Act Release No. 58228 (July 25, 2008), 
73 FR 44794 (July 31, 2008) (adopting the predecessor to IM-5101-2).
    \10\ See Nasdaq Rule IM-5101-2(d) and (e).
    \11\ See Nasdaq Rule IM-5101-2(d). If a shareholder vote on the 
business combination is not held, the company must provide all 
shareholders with the opportunity to redeem their shares for cash 
equal to their pro rata share of the aggregate amount then in the 
deposit account (net of taxes payable and amounts distributed to 
management for working capital purposes). Nasdaq Rule IM-5101-2(e).
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    Under the existing rules, ``following each business combination'' 
with an Acquisition Company, the resulting company must satisfy all 
initial listing requirements. The rule does not provide a timetable for 
the company to demonstrate that it satisfies those requirements, 
however. Accordingly, Nasdaq proposes to modify the rule to specify if 
the Acquisition Company demonstrates that it will satisfy all 
requirements except the applicable round lot shareholder requirement, 
then the company will receive 15 calendar days following the closing to 
demonstrate that it satisfied the applicable round lot shareholder 
requirement immediately following the transaction's closing.
    Ordinarily, in determining compliance with the round lot 
shareholder requirement at the time of a business combination, Nasdaq 
will review a company's public disclosures and information provided by 
the company about the transaction. For example, the merger agreement 
may result in the Acquisition Company issuing a round lot of shares to 
more than 300 holders of the target of the business combination at 
closing. If public information is not available that enables Nasdaq to 
determine compliance, Nasdaq will typically request that the company 
provide additional information such as registered shareholder lists 
from the company's transfer agent, data from Cede & Co. about shares 
held in street name, or data from broker-dealers and from third parties 
that distribute information such as proxy materials for the broker-
dealers.\12\ If the company can provide information demonstrating 
compliance before the business combination closes, no further 
information would be required.
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    \12\ Companies must seek this information from third parties 
because many accounts are held in street name and shareholders may 
object to being identified to the company.
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    However, Nasdaq has observed that in some cases it can be difficult 
for a company to obtain evidence demonstrating the number of 
shareholders that it has or will have following a business combination. 
As noted above, shareholders of an Acquisition Company may redeem or 
tender their shares until just before the time of the business 
combination, and the company may not know how many shareholders will 
choose to redeem until very close to the consummation of the business 
combination. In cases where the number of round lot shareholders is 
close to the applicable requirement, this could affect the ability for 
Nasdaq to determine compliance before the business combination closes. 
Accordingly, for a company that has demonstrated that it will satisfy 
all initial listing requirements except for the round lot shareholder 
requirement before consummating the business combination, Nasdaq will 
allow the company 15 calendar days after the closing of the business 
combination, if necessary, to demonstrate that it also complied with 
the round lot requirement at the time of the business combination. To 
be clear, the company must still demonstrate that it satisfied the 
round lot shareholder requirement immediately following the business 
combination; the proposal is merely giving the company 15 calendars 
days to provide evidence that it did.
    Providing Acquisition Companies with an additional 15 days to 
demonstrate compliance with the round lot rule as of the date of the 
business combination will result in the continuation of the listing of 
companies that have completed a business combination but not yet 
demonstrated that they satisfied all initial listing requirements. For 
this reason, the Exchange proposes that each Acquisition Company that 
has not demonstrated compliance with the applicable round lot 
shareholder requirement on the date of the business combination's 
closing will be required to issue a press release or file a Form 8-K, 
if required, prior to closing of the business combination, stating that 
the company is relying upon the additional 15 calendar days available 
under Nasdaq rules to demonstrate

[[Page 14510]]

compliance. The company also will be required to note that in the event 
it is unable to demonstrate compliance, the company will be subject to 
delisting. In the event the Acquisition Company does not make the 
required public disclosure prior to the closing of the business 
combination, Nasdaq will halt trading in the company's securities until 
such time as the required announcement is made public.
    Nasdaq believes that this proposal balances the burden placed on 
the Acquisition Company to obtain accurate shareholder information for 
the new entity and the need to ensure that a company that does not 
satisfy the initial listing requirements following a business 
combination enters the delisting process promptly. If the company does 
not evidence compliance within the proposed time period, Nasdaq staff 
would issue a delisting determination, which the company could appeal 
to an independent Hearings Panel as described in the 5800 Series of the 
Nasdaq Rules. Nasdaq also believes that the disclosure requirement will 
help provide transparency to investors about the status of the company 
during this time.
    Finally, Nasdaq proposes a non-substantive change to eliminate a 
duplicate paragraph in paragraphs (d) and (e) of IM-5101-2 and to add a 
new paragraph designation.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\13\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\14\ in particular, in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest, by imposing a specific timeline for Acquisition Companies to 
demonstrate that they will comply with the initial listing requirements 
following a business combination and allowing a reasonable period of 
time for the company to provide evidence that it complied with the 
round lot shareholder requirement at the time of the business 
combination.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
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    The proposed rule would specify the time when an Acquisition 
Company must demonstrate compliance with the initial listing standards 
following the completion of a business combination, thereby enhancing 
investor protection. Specifically, it would require an Acquisition 
Company to provide evidence before completing the business combination 
that it will satisfy all requirements for initial listing, except for 
the round lot shareholder requirement. While the proposed rule would 
allow Acquisition Companies 15 calendar days, if needed, to provide 
evidence that they also complied with the round lot shareholder 
requirement at the time of the business combination, that additional 
time is a reasonable accommodation given both the difficulty companies 
face in identifying their shareholders and the ability for the 
Acquisition Company's shareholders to redeem their shares when the 
business combination is consummated. In that regard, Acquisition 
Companies are unlike other newly listing companies, which do not face 
redemptions and are not already listed and trading at the time they 
must demonstrate compliance. Importantly, the company must still 
demonstrate that it satisfied the round lot shareholder requirement 
immediately following the business combination. The proposed rule also 
requires an Acquisition Company utilizing the additional 15 day period 
after closing of the business combination to file a Form 8-K, were 
required by SEC rules, or issue a press release, prior to the closing 
of the business combination, noting that the company is relying upon 
the additional 15 calendar days available under Nasdaq rules to 
demonstrate compliance. The company must also note that in the event it 
is unable to demonstrate compliance, the company will be subject to 
delisting. In the event the Acquisition Company does not make the 
required disclosure prior to the listing of the combined company, 
Nasdaq will halt trading in the company's securities until such time as 
the required announcement is made public. The Exchange believes this 
disclosure requirement will ensure that prospective investors are aware 
that the company has not yet demonstrated that it meets the shareholder 
requirement and therefore may be delisted. In light of these 
requirements, Nasdaq believes that the proposed rule change 
appropriately balances the protection of prospective investors with the 
protection of shareholders of the Acquisition Company, the latter of 
whom would be harmed if Nasdaq issued a delisting determination at a 
time when the company did, in fact, satisfy all initial listing 
requirements but could not yet provide proof.
    The proposed rule change is also consistent with Section 6(b)(7) of 
the Act in that it provides a fair procedure for the prohibition or 
limitation by the Exchange of any person with respect to access to 
services offered. The proposed rule change accounts for the particular 
difficulties encountered by Acquisition Companies when attempting to 
determine their total number of shareholders due to the ability of 
shareholders to redeem their shares. Acquisition Companies will still 
be required to demonstrate compliance with all initial listing 
standards immediately following the business combination, which is the 
initial listing of the combined company. This is no different from the 
requirements imposed on other newly listing companies.
    The non-substantive changes to eliminate a duplicate paragraph in 
paragraphs (d) and (e) of IM-5101-2 and to add a new paragraph 
designation will improve the rule's readability and thereby remove an 
impediment to a free and open market and a national market system and 
help to better protect investors, which Nasdaq believes is consistent 
with the requirements of Section 6(b)(5) of the Act.\15\
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    \15\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed rule would clarify 
that a company listing in connection with a merger with an Acquisition 
Company must provide evidence before completing the business 
combination that it will satisfy all requirements for initial listing, 
although a reasonable accommodation would be made to allow the company 
to demonstrate compliance with the round lot shareholder requirement 
before issuing a delisting letter if that is the only requirement that 
the company cannot demonstrate compliance with before completing the 
business combination. This change is not expected to have any impact on 
competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    On December 21, 2020, the Commission issued an Order Instituting 
Proceedings \16\ (``OIP'') pursuant to Section 19(b)(2)(B) of the Act 
to determine whether to approve or disapprove the Original Proposal

[[Page 14511]]

superseded by this Amendment No. 1. In response to the OIP, the Council 
of Institutional Investors (``CII'') submitted a comment letter dated 
January 7, 2021.\17\ Simultaneous to the submission of this Amendment 
No. 1, the Exchange is submitting a comment letter in response to the 
Commission's OIP. That comment letter addresses the issues raised in 
the CII comment letter.
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    \16\ Securities Exchange Act Release No. 90682 (December 21, 
2021), 85 FR 83113 (December 16, 2020).
    \17\ See Letter from Jeffrey P. Mahoney, Council of 
Institutional Investors Letter to Secretary, Securities and Exchange 
Commission (January 7, 2021). CII also raised concerns with the SPAC 
structure that are outside the scope of Nasdaq's proposal.
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III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as modified by Amendment No. 1, is consistent with the Act. 
Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NASDAQ-2020-062 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2020-062. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NASDAQ-2020-062, and should be submitted 
on or before April 6, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-05345 Filed 3-15-21; 8:45 am]
BILLING CODE 8011-01-P