[Federal Register Volume 86, Number 171 (Wednesday, September 8, 2021)]
[Notices]
[Pages 50408-50411]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-19292]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92839; File No. SR-NYSE-2021-42]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change To Amend the Requirements of 
Section 102.06 of the NYSE Listed Company Manual To Allow an 
Acquisition Company To Contribute a Portion of Its Trust Account to a 
New Acquisition Company and Spin-Off the New Acquisition Company to Its 
Shareholders

September 1, 2021.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on August 23, 2021, New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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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 the requirements of Section 102.06 
of the NYSE Listed Company Manual (``Manual'') for the listing of 
acquisition companies and the provisions of Section 802.01B with 
respect to the qualification of an acquisition company after its 
business combination. The proposed rule change is available on the 
Exchange's website at www.nyse.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

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 self-regulatory organization 
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 those 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 parts of such statements.

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

1. Purpose
    The Exchange proposes to modify Section 102.06 of the Manual to 
allow an acquisition company listed under that rule to contribute a 
portion of the amount held in its trust account to a trust account of a 
new AC and spin off the new AC to its shareholders in certain 
situations where the new AC will be subject to all of the same 
requirements as the original AC.
    In 2008, the Exchange adopted a rule to allow companies that have 
no specific business plan or that have indicated their business plan is 
to consummate the acquisition of one or more operating businesses or 
assets (a ``Business Combination'') to list if they meet all applicable 
initial listing requirements, as well as additional conditions designed 
to provide investor protections to address specific concerns about the 
structure of such companies (``Acquisition Companies'' or ``ACs'').\4\

[[Page 50409]]

These additional conditions generally require, among other things, that 
at least 90% of the gross proceeds from the initial public offering 
must be deposited in a ``trust account,'' as that term is defined in 
the rule, and that the AC complete within three years (or such shorter 
period specified by the AC's constitutive documents or by contract) one 
or more Business Combinations having an aggregate fair market value of 
at least 80% of the value of the trust account at the time of the 
agreement to enter into the initial combination.
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    \4\ See Securities Exchange Act Release No. 57785 (May 6, 2008), 
73 FR 27597 (May 13, 2008) (SR-NYSE-2008-17).
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    When an AC conducts its initial public offering, it raises the 
amount of capital that it estimates will be necessary to finance a 
subsequent business combination with its ultimate target. However, 
because an AC cannot identify or select a specific Business Combination 
target at the time of its IPO, it often turns out that the amount 
raised is not optimal for the needs of a specific target. This has 
resulted in the inefficient, current practice of AC sponsors creating 
multiple ACs of different sizes at the same time, with the intention to 
use the AC that is closest in size to the amount a particular target 
needs. This practice creates the potential for conflicts between the 
multiple ACs (each of which has different shareholders) and still fails 
to optimize the amount of capital that would benefit the AC's public 
shareholders and a Business Combination target. Moreover, this creates 
the need for repetitive action throughout the ecosystem, including the 
filing and SEC review of multiple registration statements and periodic 
reports, formation of multiple boards of directors, multiple audits and 
multiple company listings. This practice also can lead to confusion 
amongst investors.
    Accordingly, the Exchange proposes to modify Section 102.06 to 
permit a more efficient structure whereby an AC can raise in its 
initial public offering the maximum amount of capital it anticipates it 
may need for a Business Combination transaction and then ``rightsize'' 
itself by contributing any amounts not needed to a new AC (the ``SpinCo 
AC''), and spinning off this SpinCo AC to its shareholders. The SpinCo 
AC will be subject to all the existing provisions of Section 102.06 in 
the same manner, and subject to the same timeframes, as the original 
AC.
    It is expected that, if approved, the new structure will be 
implemented in the following manner. If the listed AC determines that 
it will not need all of the cash in its trust account for its initial 
business combination, it will designate the excess cash for a new trust 
account held by a SpinCo AC, which will be spun off to the original 
AC's shareholders as described below. Until the spin-off described 
below, the amount designated for the SpinCo trust account must continue 
to be held for the benefit of the shareholders of the original AC. 
Following the spin-off, the SpinCo trust account will be subject to the 
same requirements as the trust account of the original AC.
    The SpinCo AC will file a registration statement under the 
Securities Act of 1933 for purposes of effecting the spin-off of the 
SpinCo AC. Prior to the effectiveness of the registration statement, 
the original AC will provide its public shareholders through one or 
more corporate transactions with the opportunity to redeem a pro rata 
amount of their holdings equal to the amount of the SpinCo trust 
account divided by the per share amount in the original AC's trust 
account (the ``redemption price'').\5\
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    \5\ This redemption could occur, for example, through a partial 
cash tender offer for shares of the original AC pursuant to Rule 
13e-4 and Regulation 14E of the Securities Exchange Act of 1934, and 
the redemption may be of a separate class of shares distributed to 
unitholders of the original AC for the purpose of facilitating the 
redemption.
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    After completing the tender offer and effectiveness of the SpinCo 
AC's registration statement, the original AC will contribute the SpinCo 
trust account to a trust account held by the SpinCo AC in exchange for 
shares or units of the SpinCo AC, which the original AC will then 
distribute to its public shareholders on a pro rata basis through one 
or more corporate transactions pursuant to the SpinCo AC's effective 
registration statement.
    The original AC will then continue to operate as an AC until it 
completes its business combination and will offer redemption rights to 
its public shareholders in connection with that business combination in 
the same manner as a traditional AC. The SpinCo AC will operate in the 
same manner as a traditional AC, except that it could effect a spin-off 
prior to its business combination like the original AC. If it does not 
elect to effect a spin-off, the SpinCo AC will either (1) proceed to 
complete an initial business combination and offer redemption rights in 
connection therewith like a traditional AC or (2) liquidate.
    The Exchange proposes adopting a new subsection of Section 102.06 
which will specifically permit this type of transaction by allowing the 
Original AC to contribute (the ``Contribution'') a portion of the 
amount held in the trust account to the trust account of a SpinCo AC in 
a spin-off or similar corporate transaction where all of the conditions 
described below are satisfied:
    (i) In connection with the Contribution, each AC public shareholder 
has the right, through one or more corporate transactions, to redeem a 
portion of its shares of common stock or units, as applicable, for its 
pro rata portion of the amount of the Contribution in lieu of being 
entitled to receive shares or units in the SpinCo AC;
    (ii) the requirement of Section 102.06 that the AC provide each 
public shareholder voting against a Business Combination with the right 
to convert its shares of common stock into a pro rata share of the 
aggregate amount then on deposit in the trust account (net of taxes 
payable, and amounts disbursed to management for working capital 
purposes), provided that the Business Combination is approved and 
consummated, will be considered satisfied by pro rata distribution to 
such shareholders of the amounts in the trust account after having been 
reduced by the Contribution;
    (iii) the public shareholders of the AC receive shares or units of 
the SpinCo AC on a pro rata basis, except to the extent they have 
elected to redeem a portion of their shares of the AC in lieu of being 
entitled to receive shares or units in the SpinCo AC;
    (iv) the Contribution will remain in a trust account for the 
benefit of the shareholders of the SpinCo AC in the manner required for 
ACs listed under Section 102.06;
    (v) the SpinCo AC meets all applicable initial listing requirements 
for an AC listing in connection with an initial public offering under 
Section 102.06; it being understood that, following such spin-off or 
similar corporate transaction:
    (A) The 80% described in the first paragraph of Section 102.06 
shall, in the case of the AC, be calculated based on the aggregate 
amount remaining in the trust account of the AC at the time of the 
agreement to enter into the Business Combination as reduced by the 
Contribution, and, in the case of the SpinCo AC, be calculated based on 
the aggregate amount in its trust account at the time of its agreement 
to enter into a Business Combination, and
    (B) the right to convert and opportunity to redeem shares of common 
stock on a pro rata basis required for ACs listed under this Section 
102.06 shall, in the case of the AC, be deemed to apply to the 
aggregate amount remaining in the trust account of the AC after the 
Contribution to the SpinCo AC, and, in the case of the

[[Page 50410]]

SpinCo AC, be deemed to apply to the aggregate amount in its trust 
account;
    (vi) in the case of the SpinCo AC, and any additional entities spun 
off from the SpinCo AC, each of which will also be considered a SpinCo 
AC, the 36-month period within which a listed AC must consummate its 
Business Combination under Section 102.06 (or such shorter period that 
the AC specifies in its registration statement) will be calculated 
based on the date of effectiveness of the AC's IPO registration 
statement; and
    (vii) in the aggregate, through one or more opportunities by the AC 
and one or more SpinCo ACs, public shareholders will have the ability 
to convert or redeem shares, or receive amounts upon liquidation, for 
the full amount of the trust account established by the AC as described 
in the first paragraph of this Section 102.06 (excluding any deferred 
underwriters fees and taxes payable on the income earned on the trust 
account).
    For the avoidance of doubt, the conditions above will similarly 
apply to successive spinoffs or similar corporate transactions.
    Under Section 102.06, a majority of the AC's independent directors 
must approve its Business Combination and a majority of the independent 
directors of the SpinCo AC must approve the SpinCo AC's Business 
Combination.
    The structure allows public shareholders an additional, early 
redemption opportunity with respect to a portion of their holdings, 
before the time they would be able to do so in a traditional AC, and 
public shareholders would maintain the ability to redeem the portion of 
their investment attributable to each specific acquisition after 
reviewing all disclosure with respect to that acquisition. All other 
protections provided under Section 102.06 would continue to apply, with 
adjustments only to reflect the potential for a spin-off of a new AC 
that is subject to all of the requirements of Section 102.06. Moreover, 
the proposed structure would also provide shareholders the opportunity 
to invest with a sponsor without spreading that investment across the 
sponsor's multiple ACs.
    Finally, the Exchange proposes to amend the subsection of Section 
802.01B of the Manual setting forth the continued listing criteria 
applicable to ACs to specify that those criteria are also applicable in 
their entirety to SpinCo ACs. In addition, the Exchange proposes to add 
a new subsection to Section 102.06 stating that the applicable 
continued listing criteria for both ACs and SpinCo ACs are set forth in 
Section 802.01B.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\6\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\7\ 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 establishing the means through 
which an AC can complete more than one business combination resulting 
in separate operating companies.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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    The Commission has previously concluded that listing an acquisition 
company that satisfies the requirements of Section 102.06 is consistent 
with the investor protection goals of the Act.\8\ The proposed rule 
change will extend these important investor protections to a new 
structure that addresses inefficiencies and potential conflicts of 
interest in the AC market. Specifically, as proposed, a SpinCo AC will 
be required to satisfy all applicable initial listing requirements, 
like any other AC listing on the Exchange. In addition, the provisions 
of Section 102.06 will apply to the SpinCo AC in the same manner as 
they apply to any other AC, except the trust account will be 
contributed to the SpinCo AC by the original AC.
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    \8\ See Securities Exchange Act Release No. 57785, supra note 3.
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    The existing requirements of Section 102.06 with respect to the 
consummation of a business combination and the related redemption 
rights will also apply to each of the original AC and the SpinCo AC in 
the proposed structure in the same manner as they apply to any other 
AC, except that the 80% test will be applied to the amount retained by 
the original AC after public shareholders have had an initial, early 
redemption opportunity and the original AC has contributed a portion of 
its trust account to the SpinCo AC. The Exchange believes that this 
proposed difference does not adversely affect shareholders because the 
shareholders will still have the opportunity to redeem for the entire 
pro rata share of the trust account prior to completion of the business 
combination. The primary difference is that the redemption right may be 
effected through two decisions, one of which is accelerated to allow an 
earlier redemption than would be available to the public shareholders 
of a traditional AC and the other will come at the time of the business 
combination, just as in a traditional AC.
    As with the existing rules, each business combination must be 
approved by the AC's independent directors, as required by the existing 
provisions of Section 102.06, and following each business combination, 
the combined company must satisfy all initial listing requirements, as 
required by Section 802.01B.
    Accordingly, in this manner, the Exchange believes that the 
proposed rule change satisfies the requirements of Section 6(b)(5) of 
the Act in that it is designed 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.

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 be 
available in a non-discriminatory way to any company satisfying its 
requirements, as well as all other applicable NYSE listing 
requirements. In addition, the Exchange faces competition for listings 
but the proposed rule change does not impose any burden on the 
competition with other exchanges; any competing exchange could 
similarly adopt rules to allow listing ACs using such a structure.

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

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or up to 90 days (i) as the Commission may designate 
if it finds such longer period to be appropriate and publishes its 
reasons for so finding or (ii) as to which the self-regulatory 
organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

[[Page 50411]]

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change 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-NYSE-2021-42 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-NYSE-2021-42. 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-NYSE-2021-42, and should be submitted on 
or before September 29, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\

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    \9\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-19292 Filed 9-7-21; 8:45 am]
BILLING CODE 8011-01-P