[Federal Register Volume 84, Number 249 (Monday, December 30, 2019)]
[Notices]
[Pages 72065-72067]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-28029]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87821; File No. SR-NYSE-2019-67]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change, as Modified by Amendment No.
1, To Amend Chapter One of the Listed Company Manual To Modify the
Provisions Relating to Direct Listings
December 20, 2019.
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 December 11, 2019, New York Stock Exchange LLC (``NYSE'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') a proposed rule change. On December 13, 2019, the
Exchange filed Amendment No. 1 to the proposed rule change, which
amended and replaced the proposed rule change in its entirety. The
proposed rule change, as modified by Amendment No. 1, is described in
Items I, 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. 1, 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 Chapter One of the Listed Company
Manual (the ``Manual'') to modify the provisions relating to direct
listings.\4\ 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.
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\4\ The Exchange has previously filed a proposed rule change to
amend Chapter One of the Manual to modify the provisions related to
direct listings. See SR-NYSE-2019-67. The Exchange is now filing
this Amendment No. 1 to SR-NYSE-2019-67 to make clear in Exhibit 5
to this filing that a company conducting a Primary Direct Floor
Listing in which the company sells shares in the opening auction
with a market value of less than $100 million will be eligible to
list if the aggregate of the market value of publicly-held shares
immediately prior to listing together with the market value of
shares sold by the company in the opening auction totals at least
$250 million. This Amendment No.1 to SR-NYSE-2019-67 replaces SR-
NYSE-2019-67 as originally filed and supersedes such filing in its
entirety.
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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
the Statutory Basis for, the Proposed Rule Change
1. Purpose
Section 102.01B of the Manual includes initial listing requirements
for a company that has not previously had its common equity securities
registered under the Act, to list its common equity securities on the
Exchange at the time of effectiveness of a registration statement filed
solely for the purpose of allowing existing shareholders to sell their
shares (a ``Selling Shareholder Direct Floor Listing'').\5\ To allow a
company to sell shares on its own behalf in connection with its initial
listing upon effectiveness of a registration statement, without a
traditional underwritten public offering, the Exchange proposes to
amend Section 102.01B. The proposed change would allow a company that
has not previously had its common equity securities registered under
the Act, to list its common equity securities on the Exchange at the
time of effectiveness of a registration statement pursuant to which the
company will sell shares in the opening auction on the first day of
trading on the Exchange (a ``Primary Direct Floor Listing''). The
proposal would permit a company to conduct a Primary Direct Floor
Listing in addition to, or instead of, a Selling Shareholder Direct
Floor Listing.
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\5\ Securities Exchange Act Release No. 82627 (February 2,
2018), 83 FR 5650 (February 8, 2018) (SR-NYSE-2017-30).
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[[Page 72066]]
In considering the initial listing of a company in connection with
a Selling Shareholder Direct Floor Listing, Section 102.01B currently
provides that the Exchange will determine that such company has met the
applicable $100 million aggregate market value of publicly-held shares
requirement based on a combination of both (i) an independent third-
party valuation of the company (a ``Valuation'') and (ii) the most
recent trading price for the company's common stock in a trading system
for unregistered securities operated by a national securities exchange
or a registered broker-dealer (a ``Private Placement Market''). The
Exchange will attribute a market value of publicly-held shares to the
company equal to the lesser of (i) the value calculable based on the
Valuation and (ii) the value calculable based on the most recent
trading price in a Private Placement Market. Alternatively, in the
absence of any recent trading in a Private Placement Market, Section
102.01B provides that the Exchange will determine that such company has
met its market value of publicly-held shares requirement if the company
provides a Valuation evidencing a market value of publicly-held shares
of at least $250 million. With respect to this requirement, the
Exchange is proposing the following:
The Exchange proposes that a company would qualify for
listing in connection with a Primary Direct Floor Listing by selling at
least $100 million in market value of shares in the opening auction.
The Exchange proposes that a company would qualify for
listing in connection with a Primary Direct Floor Listing if the
aggregate of the market value of publicly-held shares immediately prior
to listing together with the market value of shares sold by the company
in the opening auction totals at least $250 million.
The Exchange also proposes to modify the distribution requirements
for listing in connection with a Selling Shareholder Direct Floor
Listing or a Primary Direct Floor Listing. Pursuant to Section 102.1A
of the Manual, any company listing in connection with either a Selling
Shareholder Direct Floor Listing or a Primary Direct Floor Listing is
required to have at least 400 round lot holders and 1.1 million
publicly-held shares at the time of listing. Private companies
generally do not have as many as 400 round lot shareholders, but this
is typically not a barrier to listing for a company undertaking an
initial public offering as the underwriters are able to ensure that the
shares sold in the IPO are distributed to sufficient accounts to meet
the Exchange's distribution standards. However, in the absence of an
underwritten transaction at the time of listing, the initial listing
distribution standards may represent more of a challenge for a private
company contemplating listing in connection with a Selling Shareholder
Direct Floor Listing or a Primary Direct Floor Listing.
The Exchange believes that a Primary Direct Floor Listing in which
the company sells at least $250 million of its stock in the opening
auction on the day of listing would provide an appropriately liquid
trading market and make highly likely that the company would meet the
initial listing distribution standards quickly after initial listing.
Consequently, the Exchange proposes to amend Section 102.01A to provide
that any company listing in connection with a Primary Direct Floor
Listing in which the company sells at least $250 million in market
value of shares in the opening auction on the initial listing date may
list and commence trading on the basis that the company would have to
demonstrate compliance with the distribution requirements within 90
trading days of the listing date (the ``Distribution Standard
Compliance Period''). Any company that fails to meet the distribution
standards by the end of the Distribution Standard Compliance Period
would be deemed to be below compliance. In that case, the company would
have the opportunity to submit a compliance plan as set forth in the
applicable procedures in Sections 802.02 and 802.03 of the Manual, but
will not be granted a plan period that extends more than six months
from the end of the Distribution Standard Compliance Period. If a
company does not meet the initial listing distribution standards by the
end of the maximum six month compliance period, it would be subject to
immediate suspension and delisting.
In addition, the Exchange proposes to provide the benefit of the
same Distribution Standard Compliance Period in the case of: (i) A
company listing in connection with a Selling Shareholder Direct Floor
Listing that demonstrates $350 million in market value of publicly-held
shares; and (ii) a Primary Direct Floor Listing in which the company
sells less than $250 million of its stock in the opening auction but
has a market value of publicly-held shares immediately prior to listing
together with the market value of shares sold by the company in the
opening auction totaling at least $350 million.
Currently, a company listing in connection with a Selling
Shareholder Direct Floor Listing is required to demonstrate at the time
of initial listing that it has at least 400 round lot holders and (i)
at least $100 million in market value of publicly-held shares based on
the lower of a Valuation or the most recent trading price in a Private
Placement Market or (ii) at least $250 million in market value of
publicly-held shares. The Exchange proposes that a company with $350
million in market value of publicly-held shares (including in the case
of a company listing in connection with a Primary Direct Floor Listing
where the aggregate of the shares sold by the company in the opening
auction and the market value of the publicly-held shares outstanding
immediately before the listing is at least $350 million) may list and
commence trading on the basis that the company would have to
demonstrate compliance with the distribution requirements within 90
trading days of the listing date. The Exchange notes that the market
value of publicly-held shares requirement for listings other than
direct floor listings and IPOs is $100 million, so the $350 million
public float that would be required under this proposal to use the
Distribution Compliance Period is far higher than what a newly-listed
company would have to demonstrate under other circumstances. The
Exchange believes that this heightened standard significantly increases
the likelihood that a liquid trading market will develop after a
Selling Shareholder Direct Floor Listing or Primary Direct Floor
Listing and therefore makes it likely that these companies will meet
the initial distribution standards within the Distribution Standard
Compliance Period.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Exchange Act,\6\ in general, and furthers the
objectives of Section 6(b)(5) of the Exchange Act,\7\ in particular 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,
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
[[Page 72067]]
permit unfair discrimination between customers, issuers, brokers, or
dealers.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed amendment is consistent
with the protection of investors. The proposal would require that a
company in a Primary Direct Floor Listing must either sell at least
$100 million of its listed securities in the opening auction or
demonstrate that the sum of its market value of publicly-held shares
immediately prior to listing and the market value of shares sold by the
company in the opening auction is at least $250 million. These
requirements would provide that any company conducting a Primary Direct
Floor Listing would be of a suitable size for Exchange listing and that
there would be sufficient liquidity for the security to be suitable for
auction market trading.
The proposal to provide a limited grace period for companies to
meet the initial distribution requirements in connection with a Selling
Shareholder Direct Floor Listing or a Primary Direct Floor Listing is
consistent with the protection of investors because the enhanced public
float requirements of $350 million for Selling Shareholder Direct Floor
Listings and Primary Direct Floor Listings in which the company sells
less than $250 million in market value of shares in the opening auction
and the $250 million minimum opening trade requirement for all other
Primary Direct Floor Listings would make it probable that there would
be a quick development of a liquid trading market and that the company
would comply with the initial listing distribution standards within the
Distribution Standard Compliance Period.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change would
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed amendments
would not impose any burden on competition, but would rather increase
competition by providing new pathways for companies to access the
public markets.
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.
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. 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-NYSE-2019-67 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-2019-67. 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 such 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-2019-67, and should be submitted on
or before January 21, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\8\
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\8\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-28029 Filed 12-27-19; 8:45 am]
BILLING CODE 8011-01-P