[Federal Register Volume 90, Number 236 (Thursday, December 11, 2025)]
[Notices]
[Pages 57510-57516]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-22469]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-104344; File No. SR-NASDAQ-2025-066]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing of Amendment No. 1 and Order Granting Accelerated
Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To
Amend Certain Initial Listing Requirements for de-SPAC Transactions
December 8, 2025.
On August 22, 2025, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``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 modify the rules applicable to
de-SPAC transactions (as defined below) to align the treatment of over-
the-counter (``OTC'') trading SPACs (as defined below) with similarly
situated exchange-listed SPACs. The proposed rule change was published
for comment in the Federal Register on September 9, 2025.\3\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 103864 (Sept. 4,
2025), 90 FR 43493 (``Notice'').
---------------------------------------------------------------------------
On September 25, 2025, pursuant to Section 19(b)(2) of the 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
[[Page 57511]]
proposed rule change.\5\ The Commission received comments on the
proposal.\6\ On December 4, 2025, the Exchange submitted Amendment No.
1 to the proposed rule change as described in Items I and II below,
which Items have been prepared by the Exchange. Amendment No. 1
replaced and superseded the proposed rule change as originally
filed.\7\ The Commission is publishing this notice to solicit comments
on Amendment No. 1 from interested persons, and is approving the
proposed rule change, as modified by Amendment No. 1, on an accelerated
basis.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 104046, 90 FR 47110
(Sept. 30, 2025) (designating Dec. 8, 2025 as the date by which the
Commission shall either approve, disapprove, or institute
proceedings to determine whether to disapprove the proposed rule
change).
\6\ Comments received on the proposed rule change are available
at: https://www.sec.gov/comments/sr-nasdaq-2025-066/srnasdaq2025066.htm.
\7\ Amendment No. 1 is available on the Commission's website at:
https://www.sec.gov/comments/sr-nasdaq-2025-066/srnasdaq2025066.htm.
Amendment No. 1: (i) specifies that the proposed changes will apply
only to a de-SPAC transaction involving a SPAC, as defined below,
which was previously listed on a national securities exchange and
provides its public shareholders the opportunity to redeem or tender
their shares in connection with the de-SPAC transaction in exchange
for a pro rata share of the IPO proceeds and concurrent sale by the
company of equity securities; (ii) address a commenter's suggestion
for a technical revision regarding the proposed rule language for
the timing of the effectiveness of a registration statement as it
relates to the listing of a company in connection with a de-SPAC
transaction, as defined below; and (iii) makes minor technical
changes to improve the structure, clarity and readability of the
proposed rules and this proposal.
---------------------------------------------------------------------------
I. Self-Regulator Organization's Description of the Proposed Rule
Change, as Modified by Amendment No. 1
The Exchange proposes to modify the rules applicable to de-SPAC
transactions to align the treatment of OTC trading SPACs with similarly
situated exchange-listed SPACs.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rulefilings, and at the principal office of the Exchange.
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-2025-066 \8\ in order
to: (i) specify that the proposed changes will apply only to a de-SPAC
transaction involving a SPAC, as defined below, which was previously
listed on a national securities exchange and provides its public
shareholders the opportunity to redeem or tender their shares in
connection with the de-SPAC transaction in exchange for a pro rata
share of the IPO proceeds and concurrent sale by the company of equity
securities; (ii) address a commentor's technical concern regarding the
proposed rule language for the timing of the effectiveness of a
registration statement as it relates to the listing of a de-SPAC
transaction, as defined below; \9\ and (iii) make minor technical
changes to improve the structure, clarity and readability of the
proposed rules and this proposal. This amendment supersedes and
replaces the Initial Proposal in its entirety.
---------------------------------------------------------------------------
\8\ Securities Exchange Act Release No. 94592 (September 4,
2025), 90 FR 43493 (September 9, 2025) (the ``Initial Proposal'').
\9\ See Letter from Penny Somer-Greif, Chair, and Gregory T.
Lawrence, Co-Chair, Committee on Securities Law of the Business Law
Section of the Maryland State Bar Association to Secretary,
Securities and Exchange Commission (September 30, 2025), available
at https://www.sec.gov/comments/sr-nasdaq-2025-066/srnasdaq2025066-665487-1989414.pdf. While the commentors expressed overall support
for the proposed changes, they noted that ``the proposed changes to
the Rules would apply with respect to `a de-SPAC transaction . . .
where the [issuer applying to list its securities on Nasdaq] is
listing upon effectiveness of a 1933 Act registration statement.'
Technically, though, such a company could not actually list upon the
effectiveness of the applicable registration statement.''
---------------------------------------------------------------------------
Nasdaq is proposing to modify the definition of a ``Reverse
Merger'' in Listing Rule 5005(a)(39) \10\ to exclude the security of a
special purpose acquisition company, as that term is defined in Item
1601(b) of Regulation S-K (``SPAC''),\11\ which was previously listed
on a national securities exchange, and is listing in connection with a
de-SPAC transaction, as that term is defined in Item 1601(a) of
Regulation S-K (``de-SPAC transaction''), in connection with an
effective 1933 Securities Act registration statement (``Registration
Statement''). Nasdaq also proposes to modify Listing Rules 5315(e)(4),
5405(a)(4), and 5505(a)(5) (the ``ADV Requirement'') to exclude the
security of a company listing in connection with a de-SPAC transaction,
involving a SPAC which was previously listed on a national securities
exchange, in connection with an effective Registration Statement, from
the minimum trading volume requirement applicable to newly listing
companies that previously traded in the over-the-counter (``OTC'')
market. The effect of these changes will be to treat a de-SPAC
transaction by such SPAC trading in the OTC market in the same way as a
de-SPAC transaction with a listed SPAC and, in each case, subject these
transactions to the same rules applicable to an initial public
offering.\12\
---------------------------------------------------------------------------
\10\ Rule 5005(a)(39) defines a ``Reverse Merger'' as ``any
transaction whereby an operating company becomes an Exchange Act
reporting company by combining, either directly or indirectly, with
a shell company which is an Exchange Act reporting company, whether
through a reverse merger, exchange offer, or otherwise.'' However,
the definition currently excludes from being a Reverse Merger ``the
acquisition of an operating company by a listed company satisfying
the requirements of IM-5101-2 or a business combination described in
Rule 5110(a).''
\11\ The term special purpose acquisition company (SPAC) means a
company that has: (1) Indicated that its business plan is to: (i)
Conduct a primary offering of securities that is not subject to the
requirements of Sec. 230.419 of this chapter (Rule 419 under the
Securities Act); (ii) Complete a business combination, such as a
merger, consolidation, exchange of securities, acquisition of
assets, reorganization, or similar transaction, with one or more
target companies within a specified time frame; and (iii) Return
proceeds from the offering and any concurrent offering (if such
offering or concurrent offering intends to raise proceeds) to its
security holders if the company does not complete a business
combination, such as a merger, consolidation, exchange of
securities, acquisition of assets, reorganization, or similar
transaction, with one or more target companies within the specified
time frame; or (2) Represented that it pursues or will pursue a
special purpose acquisition company strategy. 17 CFR 229.1601
\12\ An OTC SPAC can also structure its de-SPAC transaction such
that the operating company, and not the SPAC, is the surviving
entity. In a transaction structured in this manner, the de-SPAC
transaction would not be subject to the Reverse Merger or ADV
Requirements because the listing applicant is a new registrant and
not the OTC traded entity. The proposed rule change will therefore
also align the treatment of these various structures.
---------------------------------------------------------------------------
Reverse Merger Rule
Under Nasdaq Listing Rule 5110(c), a security issued by a Company
formed by a Reverse Merger, as defined in Listing Rule 5005(a)(39), is
eligible for initial listing only if it satisfies additional listing
conditions, including, among other requirements, that immediately
before the filing of the initial listing application, the combined
entity traded for at least one year in the U.S. over-the-counter
market, on another national securities exchange, or on a regulated
[[Page 57512]]
foreign exchange; and timely filed all required periodic financial
reports with the SEC or other regulatory authority (Forms 10-Q, 10-K or
20-F) for the prior year, including at least one annual report (the
``Reverse Merger Requirement'').\13\
---------------------------------------------------------------------------
\13\ See Listing Rule 5110(c).
---------------------------------------------------------------------------
Listing Rule 5005(a)(39) defines a ``Reverse Merger'' as a
transaction whereby an operating company becomes an Exchange Act
reporting company by combining with a shell company. While a SPAC is a
shell company, the rule specifically excludes from the definition of a
Reverse Merger the acquisition of an operating company by a ``listed''
SPAC.\14\ The Reverse Merger rule also provides an exception for a
company that lists in connection with a firm commitment underwritten
public offering where the gross proceeds to the company will be at
least $40 million.\15\
---------------------------------------------------------------------------
\14\ See Listing Rule 5005(a)(39).
\15\ See Listing Rule 5110(c)(3).
---------------------------------------------------------------------------
The Reverse Merger Requirement was designed to prevent an operating
company from becoming an Exchange Act reporting company in a so-called
``backdoor registration'' \16\ and immediately accessing public markets
without any of the vetting from investors and/or underwriters that
companies typically undergo when they perform a traditional IPO.
Moreover, in these transactions, the newly public company typically is
not required to file a 1933 Act registration statement, which is
subject to the SEC Staff review.
---------------------------------------------------------------------------
\16\ See former Commissioner Aguilar speech: Facilitating Real
Capital Formation, citing release No. 33-8587, (July 15, 2005) [70
FR 42233] (stating that ``These transactions generally take one of
two forms: In the most common type of transaction, a ``reverse
merger,'' the private business merges into the shell company, with
the shell company surviving and the former shareholders of the
private business controlling the surviving entity. In another common
type of transaction, a ``back door registration,'' the shell company
merges into the formerly private company, with the formerly private
company surviving and the shareholders of the shell company becoming
shareholders of the surviving entity.'').
---------------------------------------------------------------------------
The Commission recently adopted new rules to align the legal
obligations of companies in de-SPAC transactions with those in
traditional IPOs and mandated additional disclosures for both SPAC IPOs
and de-SPAC transactions (the ``SPAC Release'').\17\ In the SPAC
Release the Commission explained that ``[w]hile structured as an M&A
transaction, the de-SPAC transaction also is the functional equivalent
of the private target company's IPO, because it results in the target
company becoming part of a combined company that is a reporting company
and provides the private target company with access to cash proceeds
that the SPAC had previously raised from the public.'' \18\
---------------------------------------------------------------------------
\17\ Securities Exchange Act Release No. 99418 (January 24,
2024), 89 FR 14158 (February 26, 2024). In the SPAC Release the
Commission also adopted a definition for a ``de-SPAC transaction''
that Nasdaq Staff proposes to utilize. See 17 CFR 229.1601 (Item
1601 of Regulation S-K): ``The term de-SPAC transaction means a
business combination, such as a merger, consolidation, exchange of
securities, acquisition of assets, reorganization, or similar
transaction, involving a special purpose acquisition company and one
or more target companies (contemporaneously, in the case of more
than one target company).''
\18\ SPAC Release at 14160.
---------------------------------------------------------------------------
As described above, Listing Rule 5005(a)(39) already excludes a de-
SPAC transaction by a currently listed SPAC from the definition of a
Reverse Merger, as do the comparable rules of other exchanges.\19\ This
exception was premised on the fact that Nasdaq initially listed the
SPAC knowing it would seek to conduct a de-SPAC transaction, and
investors invested with that knowledge and with the benefit of the
additional disclosure and redemption possibilities that come at the
time of the de-SPAC transaction, and so it would be inconsistent to
require the company to delist and trade in the OTC market at the time
it completes the very transaction it was formed to pursue. Nasdaq
believes that modifying this definition to also exclude other de-SPAC
transactions, involving SPACs which were previously listed on a
national securities exchange, from the rule is similarly reasonable
where the de-SPAC is listing in connection with an effective
Registration Statement. The Commission treats a de-SPAC transaction as
the functional equivalent of an IPO; \20\ and given the proposed
requirement that a de-SPAC transaction occurs in connection with an
effective Registration Statement, such transaction is subject to a
level of investor protection, rigorous disclosure requirements, and SEC
review similar to that of an IPO. Accordingly, prior to the closing of
the de-SPAC transaction, SPAC shareholders will have an opportunity to
review an effective Registration Statement which would allow them to
make an informed decision whether to remain a shareholder of the
surviving company after the business combination or redeem their shares
prior to the de-SPAC transaction. Similarly, a company conducting a
firm commitment underwritten offering is also currently excluded from
the Reverse Merger rules, because such an offering involves an
underwriter and requires a Registration Statement, which includes
issuer disclosure and can be reviewed by the Commission. Thus, Nasdaq
believes that regardless of where the SPAC is trading, a company
listing on Nasdaq in connection with a de-SPAC transaction involving a
SPAC, which was previously listed on a national securities exchange and
provides its public shareholders the opportunity to redeem or tender
their shares in connection with the de-SPAC transaction in exchange for
a pro rata share of the IPO proceeds and concurrent sale by the company
of equity securities; in connection with an effective Registration
Statement should be excluded from the Reverse Merger Requirement.\21\
---------------------------------------------------------------------------
\19\ See e.g., NYSE Listed Company Manual Section 102.01F
(``However, a Reverse Merger does not include the acquisition of an
operating company by a listed company which qualified for initial
listing as an acquisition company under Section 102.06.'').
\20\ See footnote 13, above.
\21\ Following its IPO, a SPAC places all or substantially all
of the IPO proceeds into a trust or escrow account. The SPAC
typically registers its shares and warrants under Section 12(b) of
the Securities Exchange Act of 1934 and lists the units (typically
consisting of a common share and a fraction of a warrant) for
trading on a national securities exchange. Next, the SPAC seeks to
identify a target company for a de-SPAC transaction within the time
frame specified in its governing documents. If the SPAC does not
complete a de-SPAC transaction within that time frame, it may seek
an extension (often requiring approval from its shareholders) or
dissolve and liquidate. SPAC shareholders typically also have a
redemption right in connection with any votes to extend the duration
of the SPAC. Nasdaq generally expects that an OTC-trading SPAC,
which was previously listed on a national securities exchange, will
retain the investor protection features it had at the time of its
IPO, including providing its public shareholders the opportunity to
redeem or tender their shares in connection with the de-SPAC
transaction in exchange for a pro rata share of the IPO proceeds and
concurrent sale by the company of equity securities. See e.g.,
Listing Rule IM-5101-2(a) (``At least 90% of the gross proceeds from
the initial public offering and any concurrent sale by the company
of equity securities must be deposited in a trust account . . .'').
---------------------------------------------------------------------------
To effect this change, Nasdaq proposes to modify Listing Rule
5005(a)(39) to revise the existing de-SPAC exclusion from the
definition of a Reverse Merger to exclude any de-SPAC transaction, as
that term is defined in Item 1601(a) of Regulation S-K, involving a
SPAC, which is listed or was previously listed on a national securities
exchange and provides its public shareholders the opportunity to redeem
or tender their shares in connection with the de-SPAC transaction in
exchange for a pro rata share of the IPO proceeds and concurrent sale
by the company of equity securities; where the company is listing in
connection with an effective Registration Statement.
[[Page 57513]]
Average Daily Trading Volume Requirement
In 2019, the Commission approved Nasdaq's proposed changes to
enhance its initial listing standards related to liquidity (``Initial
Liquidity Amendments'').\22\ Under the revised standards, the ADV
Requirement provides that securities that traded in the OTC market
prior to the application to list such securities on Nasdaq, must have a
minimum average daily trading volume over the 30 trading days prior to
listing of at least 2,000 shares a day, with trading occurring on more
than half of those 30 days. Nasdaq adopted the ADV Requirement to help
ensure a liquid trading market, promote price discovery, and help
establish an appropriate market price for the OTC securities listing on
Nasdaq.
---------------------------------------------------------------------------
\22\ See Securities Exchange Act Release No. 86314 (July 5,
2019), 84 FR 33102 (July 11, 2019) (approving SR-NASDAQ-2019-009).
---------------------------------------------------------------------------
Since implementing the Initial Liquidity Amendments, Nasdaq has
determined that the ADV Requirement is neither necessary nor
appropriate for the listing of a Company in connection with a de-SPAC
transaction, involving a SPAC, which was previously listed on a
national securities exchange and provides its public shareholders the
opportunity to redeem or tender their shares in connection with the de-
SPAC transaction in exchange for a pro rata share of the IPO proceeds
and concurrent sale by the company of equity securities; in connection
with an effective Registration Statement.
Historically, SPACs listed and traded primarily, if not
exclusively, on national securities exchanges while pursuing a business
combination, and, at the time, the ADV Requirement was adopted SPACs
were neither targeted nor immediately affected by the ADV Requirement.
Recently, however, Nasdaq observed an increase in a number of SPACs
that have been delisted from an exchange and then trade as SPACs in the
OTC market. When an OTC-trading SPAC enters into a business combination
and applies to list on Nasdaq in connection with the de-SPAC
transaction the ADV Requirement applies because the primary equity
security ``is trading in the U.S. over-the-counter market as of the
date of application . . .'' \23\
---------------------------------------------------------------------------
\23\ See Listing Rules 5315(e)(4), 5405(a)(4), and 5505(a)(5):
``[i]f the security is trading in the U.S. over-the-counter market
as of the date of application, such security must have a minimum
average daily trading volume of 2,000 shares over the 30 trading day
period prior to listing . . .''
---------------------------------------------------------------------------
For an operating company, investors determine a valuation of the
company based on its revenues, future cash flow expectations, business
activities, and peer valuations, among other metrics. Nasdaq believes
that imposing the ADV Requirement on operating companies trading in the
OTC market helps ensure that once listed these companies will have
sufficient investor base and trading interest to provide the depth and
liquidity necessary to promote fair and orderly markets. In contrast,
in the Exchange's view, the value of a SPAC prior to a business
combination typically is not based on investor interest in the
operating company or analysis of its metrics, but instead is based
primarily on the value of the cash held in the trust account and
supported by the potential redemption ability at the time of the de-
SPAC transaction. Nasdaq therefore believes that the ADV Requirement
for OTC-trading SPACs is not relevant to help establish the legitimacy
of the SPAC market price.
Further, Nasdaq believes that the investor base in the SPAC,
typically, changes significantly at the time of the de-SPAC transaction
and investors interested in the operating company will first purchase
the securities following that transaction. As a result, trading in the
SPAC prior to the de-SPAC transaction is not indicative of how the
company will trade after the transaction and, therefore, the de-SPAC
transaction more closely resembles an IPO of the target company than an
OTC uplisting, thus rendering the ADV Requirement not meaningful in
helping establish whether the new company will trade well once listed.
Accordingly, Nasdaq proposes to modify Listing Rules 5315(e)(4),
5405(a)(4), and 5505(a)(5), on the Nasdaq Global Select, Global and
Capital Markets, accordingly, to exclude from the ADV Requirement the
security of a company listing in connection with a de-SPAC transaction,
as that term is defined in Item 1601(a) of Regulation S-K, which was
previously listed on a national securities exchange and provides its
public shareholders the opportunity to redeem or tender their shares in
connection with the de-SPAC transaction in exchange for a pro rata
share of the IPO proceeds and concurrent sale by the company of equity
securities; in connection with an effective Registration Statement.
Although OTC-trading SPACs \24\ will be excluded from the ADV
Requirement at the time of their application, the post business
combination company will be required to satisfy all of Nasdaq's other
initial listing standards, as would any IPO or other new listing.
Nasdaq believes that this will continue to help ensure that securities
of the post business combination companies have sufficient public
float, investor base, and trading interest likely to generate depth and
liquidity to support exchange listing and trading, which will help to
protect investors and the public interest.
---------------------------------------------------------------------------
\24\ See footnote 16, above.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\25\ in general, and furthers the objectives of Section
6(b)(5) of the Act,\26\ 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 (1) excluding the security of certain OTC-trading SPACs
listing in connection with a de-SPAC transaction in connection with an
Registration Statement, as described above, from the definition of a
Reverse Merger, and (2) removing a listing requirement applicable to
certain OTC-trading SPACs, as described above, that is not an
appropriate measure of investor base and trading interest. In both
cases, based on the unique characteristics of a de-SPAC transaction,
the changes will align the requirements for listing a de-SPAC
transaction with those for listing an IPO, consistent with the
treatment by the Commission in other contexts, eliminating an
impediment to a free and open market, while ensuring adequate
distribution, shareholder interest, a liquid trading market and
investor protections through other listing standards.
---------------------------------------------------------------------------
\25\ 15 U.S.C. 78f(b).
\26\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Nasdaq believes that excluding a de-SPAC transaction by an OTC-
trading SPAC, which is listed or was previously listed on a national
securities exchange and provides its public shareholders the
opportunity to redeem or tender their shares in connection with the de-
SPAC transaction in exchange for a pro rata share of the IPO proceeds
and concurrent sale by the company of equity securities; from the
Reverse Merger definition avoids imposing an unnecessary impediment to
the mechanism of a free and open market and is not unfairly
discriminatory. Specifically, as noted above, the Reverse Merger
Requirement was designed to prevent an operating company from becoming
an Exchange Act reporting company and immediately accessing public
markets without proper disclosure and vetting opportunities by the
Commission and investors. Nasdaq
[[Page 57514]]
believes that a de-SPAC transaction with such OTC-trading SPAC where
the post-transaction entity lists in connection with an effective
Registration Statement does not present the same concerns as a typical
Reverse Merger transaction. The Commission in the SPAC Release
explained that ``[w]hile structured as an M&A transaction, the de-SPAC
transaction also is the functional equivalent of the private target
company's IPO, because it results in the target company becoming part
of a combined company that is a reporting company and provides the
private target company with access to cash proceeds that the SPAC had
previously raised from the public.'' Unlike the historical ``backdoor
registrations'' that the Reverse Merger rule was designed to capture, a
de-SPAC transaction would be required to file a 1933 Act registration
statement to avail itself of the proposed rule change.
Nasdaq believes that excluding a de-SPAC transaction by such OTC-
trading SPACs from the definition of a Reverse Merger is reasonable
because it aligns the treatment of such transactions with the treatment
of a de-SPAC transaction by a Nasdaq-listed SPAC because both cases
represent the functional equivalent of an IPO, as the Commission
explained in the SPAC Release, and, therefore, these cases differ from
a typical Reverse Merger where a public shell merges into a private
company, in a so-called ``backdoor registration'' \27\ without a
Registration Statement which is subject to review by Commission
staff.\28\
---------------------------------------------------------------------------
\27\ See footnote 11, above.
\28\ Nasdaq notes that a de-SPAC transaction where the SPAC is
not the surviving entity is not subject to the Reverse Merger
Requirement because the entity to be listed is a new registrant,
and, therefore a de-SPAC transaction can already be structured so as
not to implicate the Reverse Merger Requirement.
---------------------------------------------------------------------------
The proposed requirement that a de-SPAC transaction by a previously
listed OTC-trading SPAC, as described above, or a listed SPAC, is
excluded from the definition of Reverse Merger only where the Company
is listing in connection with an effective Registration Statement is
designed to protect investors and the public interest, because it will
ensure such companies satisfy the rigorous disclosure requirements
under the Securities Act of 1933 and are subject to review by
Commission staff. In addition, as noted above, SPACs that are listed or
were previously listed \29\ on a national securities exchange,
generally have established certain investor protection safeguards.\30\
Accordingly, prior to the closing of the de-SPAC transaction, SPAC
shareholders will have an opportunity to review an effective
Registration Statement allowing them to make an informed decision
whether to remain a shareholder of the surviving company after the
business combination or redeem their shares prior to the de-SPAC
transaction.
---------------------------------------------------------------------------
\29\ See, footnote 16, above.
\30\ See, Listing Rule IM-5101-2. Listing of Companies Whose
Business Plan is to Complete One or More Acquisitions. See also,
Section 102.06 Minimum Numerical Standards--Acquisition Companies;
of the NYSE Listed Company Manual.
---------------------------------------------------------------------------
Nasdaq also believes that excluding the security of a company
listing in connection with a de-SPAC transaction, in connection with an
effective Registration Statement, as described above, from the ADV
Requirement applicable to newly listing companies that previously
traded in the OTC market is designed to avoid imposing an unnecessary
impediment to the mechanism of a free and open market and is not
unfairly discriminatory.
Specifically, as noted above, the ADV Requirement was adopted to
help ensure a liquid trading market, promote price discovery, and
establish an appropriate market price for the OTC securities listing on
Nasdaq. However, since implementing the Initial Liquidity Amendments,
Nasdaq has determined that the ADV Requirement is neither necessary nor
appropriate for the listing of de-SPAC transactions, involving a SPAC,
which was previously listed on a national securities exchange and
provides its public shareholders the opportunity to redeem or tender
their shares in connection with the de-SPAC transaction in exchange for
a pro rata share of the IPO proceeds and concurrent sale by the company
of equity securities, because trading in the SPAC is not indicative of
trading in the merged operating company because shareholders,
typically, have the opportunity to redeem their shares in the SPAC for
a pro rata portion of the trust at the time of the business
combination.
For an operating company, investors determine a valuation of the
company based on its revenues, future cash flow expectations, business
activities, and peer valuations, among other metrics. Nasdaq believes
that imposing the ADV Requirement on operating companies trading in the
OTC market helps ensure that once listed these companies will have
sufficient investor base and trading interest to provide the depth and
liquidity necessary to promote fair and orderly markets. In contrast,
in the Exchange's view, the value of a SPAC prior to a business
combination is not based solely on investor demand for the security but
is based primarily on the value of the cash held in the trust account.
In that regard, the Exchange has observed that SPACs generally have
historically traded close to the value in the trust during the period
between its public offering and the consummation of a business
combination. This suggests that the value of a SPAC's security derives
from the value of the underlying trust. Nasdaq therefore believes that
assessing the average daily trading volume of the SPAC before the
transaction is not relevant to help establish the trading
characteristics of the post transaction entity.
Further, Nasdaq believes that the investor base in the SPAC,
typically, changes significantly at the time of the de-SPAC transaction
and investors interested in the operating company will first purchase
the securities following that transaction. As a result, trading in the
SPAC prior to the de-SPAC transaction is not indicative of how the
company will trade after the transaction and, therefore, the de-SPAC
transaction more closely resembles an IPO of the target company than an
OTC uplisting rendering the ADV Requirement not meaningful in helping
establish whether the new company will trade well once listed.\31\
---------------------------------------------------------------------------
\31\ Nasdaq notes that a de-SPAC transaction where the SPAC is
not the surviving entity is not subject to the ADV Requirement
because the entity to be listed is a new registrant, and, therefore
a de-SPAC transaction can already be structured not to implicate the
ADV Requirement.
---------------------------------------------------------------------------
The Exchange believes that other listing standards will help it
ensure adequate distribution, shareholder interest and a liquid trading
market of a de-SPAC transaction security following a business
combination. In all cases, a de-SPAC transaction must satisfy Nasdaq's
initial listing standards which will continue to help ensure that
securities of the post business combination entity have sufficient
public float, investor base, and trading interest likely to generate
depth and liquidity to support exchange listing and trading, which
should help 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 changes are
designed to avoid imposing an unnecessary impediment to the mechanism
of a free and open market and does not limit the ability of companies
to list on any other national securities exchange. Furthermore, while
the rule change may
[[Page 57515]]
permit more companies to list on Nasdaq in connection with de-SPAC
transactions, other exchanges could adopt similar rules to compete for
such listings. In addition, the proposed rule change could help
facilitate competition amongst OTC-trading SPACs with other SPACs.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Discussion and Commission Findings
After careful review of the proposed rule change, as modified by
Amendment No. 1 (``Amended Proposal''), and the comments received, the
Commission finds that the Amended Proposal is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange.\32\ In particular, the
Commission finds that the Amended Proposal is consistent with Section
6(b)(5) of the Act,\33\ which requires, among other things, that the
rules of a national securities exchange be 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, protect investors and the public interest, and not designed
to permit unfair discrimination between customers, issuers, brokers, or
dealers.
---------------------------------------------------------------------------
\32\ 15 U.S.C. 78f. In approving this proposed rule change, the
Commission has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
\33\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Nasdaq proposes to enable a previously listed OTC SPAC to re-list
on the Exchange upon a de-SPAC transaction by treating the de-SPAC
transaction in the same way as a de-SPAC transaction with a listed SPAC
and, in each case, applying the Exchange rules that are applicable to
an initial public offering as opposed to the Reverse Merger process.
Two commenters expressed support for the proposal. One commenter stated
its full agreement with the Exchange's rationale for the proposal and
specifically stated that the Reverse Merger rule makes no exception for
de-SPAC transactions where an OTC-traded SPAC is applying to list on
Nasdaq as the continuing publicly listed entity following the
closing.\34\ The commenter stated that the Reverse Merger rule imposes
an unnecessary regulatory burden on OTC-traded SPACs whereby the SPAC
remains the continuing publicly listed entity following the closing of
the de-SPAC transaction \35\ and that the proposed rule change would
eliminate an obstacle to capital formation for OTC-traded SPACs.\36\
This commenter also stated that the proposed rule change would not
compromise investor protection because the OTC-traded SPACs would be
required to file a Registration Statement that would be reviewed by the
Commission and to satisfy all applicable Nasdaq initial listing
requirements.\37\ The commenter further stated that the one-year
seasoning requirement forces OTC-traded SPACs to delay their Nasdaq
listing for an entire year even if they have satisfied every other
Nasdaq initial listing requirement.\38\ The other commenter supported
the proposal but suggested a technical revision to the proposed rule's
language that a company lists ``upon effectiveness'' of the
registration statement, stating that such a company could not actually
list ``upon'' the effectiveness of the applicable registration
statement.\39\
---------------------------------------------------------------------------
\34\ See letter from Christopher Clower, Chief Operating
Officer, Welsbach Technology Metals Acquisition Corp., dated Oct. 9,
2025 (``Welsbach Letter''), at 2.
\35\ See Welsbach Letter at 2.
\36\ See Welsbach Letter at 2.
\37\ See Welsbach Letter at 1-2.
\38\ See Welsbach Letter at 2.
\39\ See letter from Penny Somer-Greif, Chair, and Gregory T.
Lawrence, Co-Chair, Committee on Securities Law of the Business Law
Section of the Maryland State Bar Association, dated Sept. 30, 2025,
at 3. In response to this commenter, the Exchange modified the
language to state, ``where the Company is listing in connection with
an effective 1933 Securities Act registration statement.''
---------------------------------------------------------------------------
The Amended Proposal will enable SPACs previously listed on a
national securities exchange but trading in the OTC market to re-list
on Nasdaq following a de-SPAC transaction, if they meet certain
conditions. In particular, these conditions require a previously listed
SPAC to (1) provide its public shareholders the opportunity to redeem
or tender their shares in connection with the de-SPAC transaction in
exchange for a pro rata share of the IPO proceeds and concurrent sale
by the company of equity securities; and (2) list in connection with an
effective Registration Statement. These conditions require the
previously listed SPAC that is engaging in a de-SPAC transaction to
provide substantially similar investor protections in connection with
the de-SPAC transaction that a listed SPAC engaging in a de-SPAC
transaction provides pursuant to Nasdaq IM-5101-2(a), (d), and (e).
Furthermore, an OTC SPAC that was previously listed on a national
securities exchange was subject to listing standards tailored to this
type of listing and the Exchange notes that an OTC SPAC generally is
expected to retain the investor protection features established at the
time of its IPO. Moreover, a re-listing following a de-SPAC transaction
must meet Nasdaq's initial listing standards. Once re-listed on Nasdaq,
the company will be subject to Nasdaq's continued listing standards and
will be subject to delisting procedures if it fails to meet those
standards.
IV. Solicitation of Comments on Amendment No. 1 to the Proposed Rule
Change
Interested persons are invited to submit written data, views and
arguments concerning whether 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-2025-066 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-2025-066. 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 filing will be available for inspection and copying at
the principal office of Nasdaq. Do not include personal identifiable
information in submissions; you should submit only information that you
wish to make available publicly. We may redact in part or withhold
entirely from publication submitted material that is obscene or subject
to copyright protection. All submissions should refer to File Number
SR-NASDAQ-2025-066 and should be submitted on or before January 2,
2026.
V. Accelerated Approval of Proposed Change, as Modified by Amendment
No. 1
The Commission finds good cause to approve the Amended Proposal
prior to
[[Page 57516]]
the 30th day after the date of publication of notice of the filing of
Amendment No. 1 in the Federal Register. Amendment No. 1, without
altering the purpose of the original proposal, provides additional
investor protection, and clarity and justification for the proposal's
consistency with the Act. Specifically, Amendment No. 1: (i) specifies
that the proposed changes will apply only to a de-SPAC transaction
involving a SPAC that was previously listed on an exchange and provides
its public shareholders the opportunity to redeem or tender their
shares in connection with the de-SPAC transaction in exchange for a pro
rata share of the IPO proceeds and concurrent sale by the company of
equity securities; (ii) address a commenter's suggestion for a
technical revision regarding the proposed rule language for the timing
of the effectiveness of a registration statement as it relates to the
listing of a company in connection with a de-SPAC transaction; and
(iii) makes minor technical changes to improve the structure, clarity
and readability of the proposed rules and this proposal.
The Commission therefore finds that Amendment No. 1 raises no novel
regulatory issues and is reasonably 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, protect investors and the public interest. Accordingly,
pursuant to Section 19(b)(2) of the Act,\40\ the Commission finds good
cause to approve the Amended Proposal on an accelerated basis prior to
the 30th day after publication of notice of the filing of Amendment No.
1 in the Federal Register.
---------------------------------------------------------------------------
\40\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------
VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\41\ that the proposed rule change (SR-NASDAQ-2025-066), as
modified by Amendment No. 1, be, and hereby is, approved on an
accelerated basis.
---------------------------------------------------------------------------
\41\ Id.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\42\
---------------------------------------------------------------------------
\42\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-22469 Filed 12-10-25; 8:45 am]
BILLING CODE 8011-01-P