[Federal Register Volume 87, Number 45 (Tuesday, March 8, 2022)]
[Notices]
[Pages 13036-13038]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-04836]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94349; File No. SR-NYSE-2021-45]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change, as Modified by Amendment No.
2, To Adopt Listing Standards for Subscription Warrants Issued by a
Company Organized Solely for the Purpose of Identifying an Acquisition
Target
March 2, 2022.
I. Introduction
On August 24, 2021, New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to adopt listing standards for
subscription warrants issued by a company organized solely for the
purpose of identifying an acquisition target. The proposed rule change
was published for comment in the Federal Register on September 10,
2021.\3\
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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. 92876 (September 3,
2021), 86 FR 50748. Comments received on the proposal are available
on the Commission's website at: https://www.sec.gov/comments/sr-nyse-2021-45/srnyse202145.htm.
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On September 30, 2021, 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 8, 2021, the Commission instituted
proceedings under Section 19(b)(2)(B) of the Exchange Act \6\ to
determine whether to approve or disapprove the proposed rule change.\7\
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\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 93221, 86 FR 55662
(October 6, 2021). The Commission designated December 9, 2021 as the
date by which the Commission shall approve or disapprove, or
institute proceedings to determine whether to approve or disapprove,
the proposed rule change.
\6\ 15 U.S.C. 78s(b)(2)(B).
\7\ See Securities Exchange Act Release No. 93741, 86 FR 71111
(Dec. 14, 2021).
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On March 1, 2022, the Exchange filed Amendment No. 2 to the
proposed rule change, which replaced the proposed rule change as
originally filed and superseded such filing in its entirety.\8\
Amendment No. 2 to the proposed rule change is described in Items II
and III 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. 2, from interested
persons.
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\8\ Amendment No. 2 is available at: https://www.sec.gov/comments/sr-nyse-2021-45/srnyse202145.htm. On February 17, 2022, the
Exchange filed Amendment No. 1 to the proposed rule change. The
Exchange withdrew Amendment No. 1 on March 1, 2022.
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II. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the NYSE Listed Company Manual
(``Manual'') to adopt a new listing standard for the listing of
Subscription Warrants. 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.
III. 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
Amendment No. 2 to SR-NYSE-2021-45
The Exchange has previously filed a proposed rule change to permit
the listing of Subscription Warrants.\9\ Amendment No. 2 to SR-NYSE-
2021-45 proposes to:
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\9\ See SR-NYSE-2021-45. On February 17, 2022, the NYSE
submitted Amendment No. 1, which was subsequently withdrawn.
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Provide that Subscription Warrants with respect to which
the exercise price is tendered after execution of an Acquisition
Agreement will not actually be exercised until consummation of the
company's business combination;
state that the Subscription Warrants must provide for a
period of at least 20 business days after effectiveness of such post-
effective amendment or new registration statement during which holders
may elect to exercise Subscription Warrants effective upon closing of
the Acquisition, which period may expire prior to the date of
consummation of the Acquisition. The terms of the Subscription Warrants
must not in any other way limit the ability of holders to exercise such
Subscription Warrants in full;
specify that Subscription Warrants must be issued for no
consideration to the securityholders of a previously existing company;
increase from 1.1 million to 20 million the number of
publicly-held Subscription Warrants that must be outstanding at the
time of initial listing;
state that a Subscription Warrant may provide by its terms
that the issuer may (1) determine, at issuance, that each Subscription
Warrant may be exercisable for a specified number of shares greater
than one share; and (2) determine, at the time it enters into an
Acquisition Agreement, that the exercise price per share may be
increased above the exercise price specified at the time of original
issuance;
provide that the Subscription Warrants must have an
opening trading price on the first day of listing of at least $1.00 per
Subscription Warrant;
provide that the Subscription Warrants may not be tendered
for exercise into common stock of a company until after such company
has complied with all requirements of the federal securities laws with
respect to such exercise, including, as appropriate, the filing and
effectiveness of a post-effective amendment to the registration
statement filed in connection with the original distribution of the
Subscription Warrants or the filing and effectiveness of a new
registration statement in connection with the exercise of such
Subscription Warrants;
state that the shares will be issued to the tendering
holders of Subscription Warrants and the proceeds released to the
issuer by the independent custodian at the time of closing of the
Acquisition;
state that the independent custodian will promptly return
the funds tendered in payment of the exercise price of Subscription
Warrants to the tendering holders (A) upon termination of the
Acquisition Agreement; or (B) if the Acquisition does not close within
twelve months from the date of entry into the definitive
[[Page 13037]]
agreement with respect to the Acquisition or such earlier time as is
specified in the operative agreements;
increase the continued listing requirement with respect to
the number of publicly-held Subscription Warrants from 100,000 to five
million; and
provide for the commencement of immediate suspension and
delisting procedures when the average trading price of the Subscription
Warrants is less than $0.25 over 30 consecutive trading days.
This Amendment No. 2 to SR-NYSE-2021-45 replaces SR-NYSE-2021-45 as
originally filed and supersedes such filing in its entirety.
Subscription Warrants
The Exchange proposes to adopt a new subsection of Section 102 of
the Manual (to be designated Section 102.09) to permit the listing of
Subscription Warrants. For purposes of proposed Section 102.09 a
Subscription Warrant is a warrant issued by a company organized solely
for the purpose of identifying an acquisition target and is exercisable
into the common stock of such company only upon consummation of such
acquisition.
Initial Listing Standards for Subscription Warrants
The Exchange will list Subscription Warrants subject to the
following requirements:
(i) The issuer of the Subscription Warrants must be a company
formed solely for the purpose of issuing the Subscription Warrants and
consummating the acquisition of one or more operating businesses or
assets with a value (calculated at the time of entry into the
acquisition agreement) equal to at least 80% of the aggregate exercise
price of the Subscription Warrants (an ``Acquisition''). The
Subscription Warrants must be issued for no consideration to the
securityholders of another previously existing company.
(ii) For a transaction to qualify as an Acquisition, the resultant
entity must qualify for initial listing on the Exchange and the
acquisition agreement must provide that the transaction will be
consummated only if the resultant entity will be listed on the Exchange
or another national securities exchange.
(iii) At the time of initial listing, the Subscription Warrants
must: (A) Have an aggregate exercise price of at least $250 million;
(B) have at least 20 million publicly held Subscription Warrants
outstanding, with an aggregate exercise price of at least $200 million;
(C) have at least 400 holders of round lots; (D) have an exercise price
per share of common stock of at least $10.00; (E) have an opening
trading price on the first day of listing of at least $1.00 per
Subscription Warrant; and (F) expire in no more than 10 years. For
purposes of proposed Section 102.09, public holders of Subscription
Warrants do not include those held by directors, officers, or their
immediate families and other concentrated holdings of 10 percent.
(iv) A Subscription Warrant may provide by its terms that the
issuer may (1) determine, at issuance, that each Subscription Warrant
may be exercisable for a specified number of shares greater than one
share; and (2) determine, at the time it enters into an Acquisition
Agreement, that the exercise price per share may be increased above the
exercise price specified at the time of original issuance of such
Subscription Warrants.
(v) The distribution of the Subscription Warrants and the issuance
of the common stock of the issuer upon exercise of the Subscription
Warrants must both be registered under the Securities Act.
(vi) The Subscription Warrants may not be tendered for exercise
into common stock of a company until after such company has (A) entered
into a binding agreement with respect to the Acquisition; and (B)
complied with all requirements of the federal securities laws with
respect to such exercise, including, as appropriate, the filing and
effectiveness of a post-effective amendment to the registration
statement filed in connection with the original distribution of the
Subscription Warrants or the filing and effectiveness of a new
registration statement in connection with the exercise of such
Subscription Warrants.
(vii) Subscription Warrants must provide for a period of at least
20 business days after effectiveness of such post-effective amendment
or new registration statement during which holders may elect to
exercise Subscription Warrants effective upon closing of the
Acquisition, which period may expire prior to the date of consummation
of the Acquisition. The terms of the Subscription Warrants must not in
any other way limit the ability of holders to exercise such
Subscription Warrants in full.
(viii) The proceeds of the exercise of the Subscription Warrants
will be held in an interest-bearing custody account controlled by an
independent custodian, pending the closing of such Acquisition. The
shares will be issued to the tendering holders of Subscription Warrants
and the proceeds released to the issuer by the independent custodian at
the time of closing of the Acquisition.
(ix) The independent custodian will promptly return the funds
tendered in payment of the exercise price of Subscription Warrants to
the tendering holders: (A) Upon termination of the Acquisition
Agreement; or (B) if the Acquisition does not close within twelve
months of entry into the definitive agreement with respect to the
Acquisition, or such earlier time as is specified in the operative
agreements. Such holders will receive cash payments equal to their
proportional share of the funds in the custody account, including any
interest earned on those funds.
(x) The issuer of the Subscription Warrants will be subject to the
same corporate governance requirements under Section 303A hereof as an
issuer of listed common stock.
(xi) The Acquisition must be approved by a majority of the
independent directors of the issuer of the Subscription Warrants.
Continued Listing Standards for Subscription Warrants
The Exchange will immediately initiate suspension and delisting
procedures of an issuer's Subscription Warrants if:
The number of publicly-held Subscription Warrants is fewer
than five million;
the number of public holders of such Subscription Warrants
is fewer than 100;
the total market capitalization of such Subscription
Warrants is below $15 million over 30 consecutive trading days; or
the average trading price of the Subscription Warrants is
less than $0.25 over 30 consecutive trading days.
For purposes of the foregoing, public holders of Subscription
Warrants do not include those held by directors, officers, or their
immediate families and other concentrated holdings of 10 percent.
An issuer of Subscription Warrants will not be eligible to follow
the procedures outlined in Sections 802.02 and 802.03 with respect to
the criteria set forth above and any such security will be subject to
delisting procedures as set forth in Section 804.00.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b)(5) of the Act,\10\ in that it is designed to promote
just and equitable principles of trade, to foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
processing information with respect to,
[[Page 13038]]
and facilitating transactions in securities, 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, and is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\10\ 15 U.S.C. 78f(b)(5).
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The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
an additional type of security that will, in turn, enhance competition
among market participants, to the benefit of investors and the
marketplace.
Furthermore, the Exchange believes that the proposed listing
standard is consistent with Section 6(b)(5) of the Act in that it
contains requirements in relation to the listing of Subscription
Warrants that provide adequate protections for investors and the public
interest. In particular, the Exchange believes that the proposed rule
provides important investor protections including, but not limited to,
providing that: (1) The issuer cannot accept Subscription Warrants for
exercise until it has entered into a definitive Acquisition Agreement
and filed and obtained effectiveness of a registration statement with
respect to such exercise; (2) cash tendered by Subscription Warrant
holders in payment of the exercise price will be held in an interest-
bearing account controlled by an independent custodian pending closing
of the Acquisition; and (3) if the Acquisition is terminated or does
not close within 12 months of the date of the Acquisition Agreement,
the tendering holders will receive a distribution of their pro rata
share of the funds in the custody account.
The Exchange also believes that the proposed quantitative standards
for Subscription Warrants are adequate to protect the interests of
investors and the public interest. The Exchange notes that the proposed
requirements that the Subscription Warrants at the time of initial
listing must have an aggregate exercise price of at least $250 million
and that there be publicly-held Subscription Warrants with an aggregate
exercise price of at least $200 million significantly exceeds the
listing requirements for SPACs set forth in Section 102.06 of the
Manual, which requires a SPAC to have an aggregate market value of $100
million and a market value of publicly-held shares of $80 million.
The Exchange believes that its existing surveillance procedures are
adequate to enable it to detect manipulative trading practices with
respect to Subscription Warrants. The Exchange notes that the NYSE and
other self-regulatory organizations have extensive experience in
conducting surveillance of the trading in securities whose value, like
that of Subscription Warrants, is substantially dependent on the
issuer's future acquisition of a yet-to-be-identified operating asset.
Such similar securities include the common stock and warrants of listed
special purpose acquisition companies (``SPACs'') and options on listed
SPAC common stocks. The Exchange also believes that the extensive
experience that exists in the trading of these kinds of securities
provides evidence that market participants are generally able to arrive
at market prices for such securities without excessive volatility and
that this experience provides a reasonable basis for understanding how
Subscription Warrants are likely to trade.
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 proposed rule change does not impose any
burden on the competition with other listing exchanges; any competing
exchange could similarly adopt rules to allow the listing of
Subscription Warrants.
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.
IV. 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. 2, 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-2021-45 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-2021-45. 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-2021-45 and should be submitted on
or before March 29, 2022.
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\11\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-04836 Filed 3-7-22; 8:45 am]
BILLING CODE 8011-01-P