[Federal Register Volume 85, Number 149 (Monday, August 3, 2020)]
[Notices]
[Pages 46759-46762]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-16709]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89413; File No. SR-NASDAQ-2020-044]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing of Proposed Rule Change To Adopt Listing Rule IM-5900-
8 To Offer a Complimentary Global Targeting Tool to Acquisition
Companies Listed Pursuant to Nasdaq IM-5101-2 that Have Publicly
Announced Entering Into a Binding Agreement for a Business Combination
July 28, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\, and Rule 19b-4 thereunder,\2\ notice is hereby given
that on July 15, 2020, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit
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comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 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 adopt Listing Rule IM-5900-8 to offer a
complimentary global targeting tool to an Acquisition Company that has
announced a business combination.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, 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 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
In 2009 Nasdaq adopted a rule (IM-5101-2) to impose additional
listing requirements on a company whose business plan is to complete an
initial public offering and engage in a merger or acquisition with one
or more unidentified companies within a specific period of time
(``Acquisition Companies'').\3\ Based on experience listing these
companies, Nasdaq proposes to adopt Listing Rule IM-5900-8 to offer a
complimentary global targeting tool to an Acquisition Company that has
publicly announced a business combination.
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\3\ Securities Exchange Act Release No. 58228 (July 25, 2008),
73 FR 44794 (July 31, 2008) (adopting the predecessor to IM-5101-2).
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Generally, Nasdaq will not permit the initial or continued listing
of a company that has no specific business plan or that has indicated
that its business plan is to engage in a merger or acquisition with an
unidentified company or companies. However, in the case of an
Acquisition Company, Nasdaq will permit the listing if the company
meets all applicable initial listing requirements, as well as the
additional conditions described in IM-5101-2. 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 ``deposit account,'' as that term is defined in the rule, and that
the company complete within 36 months, or a shorter period identified
by the company, one or more business combinations having an aggregate
fair market value of at least 80% of the value of the deposit account
at the time of the agreement to enter into the initial combination.
Acquisition Companies do not have operating businesses and tend to
trade infrequently and in a tight range until the company completes an
acquisition. Therefore, these companies do not generally need
shareholder communication services, market analytic tools or market
advisory tools and, upon listing, these companies do not receive
complimentary services from Nasdaq under IM-5900-7, even if they list
on the Nasdaq Global or Global Select Markets.\4\
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\4\ See Securities Exchange Act Release No. 79366 (November 21,
2016), 81 FR 85663 (November 28, 2016). A former Acquisition Company
is eligible to receive services under IM-5900-7 when it lists on the
Nasdaq Global or Global Select Market in conjunction with a business
combination that satisfies the conditions in IM-5101-2(b).
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However, over time Nasdaq observed that once an Acquisition Company
publicly announces a business combination with an operating company,
the Acquisition Company needs to identify and target investors
appropriate for the new business. Specifically, once the Acquisition
Company identifies the operating business it plans to acquire, the
Acquisition Company needs to focus on targeting investors who are
interested in investing in the future business operations or the
industry of the acquired business. Such investor targeting may help the
Acquisition Company convey the long-term vision of the acquired
business to investors and thus attract new investors and diminish
potential redemptions at the time of the business combination with the
operating company.\5\
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\5\ The Acquisition Company's shareholders have the right to
redeem their shares for a pro rata share of that trust in
conjunction with the business combination. See IM-5101-2(d) and (e).
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To that end, Nasdaq proposes to offer Acquisition Companies listed
on Nasdaq a complimentary global targeting tool,\6\ following the
public announcement that the company entered into a binding agreement
for the business combination intended to satisfy the conditions in
Listing Rule IM-5101-2(b) until 60 days following the completion of the
business combination or such time that the Acquisition Company publicly
announces that such agreement is terminated.\7\
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\6\ The global targeting tool would be offered through Nasdaq
Corporate Solutions, LLC, an affiliate of Nasdaq.
\7\ Nasdaq offers certain complimentary services under IM-5900-
7, based on market capitalization, to companies listing on the
Nasdaq Global and Global Select Markets in connection with an
initial public offering (other than an Acquisition Company), upon
emerging from bankruptcy, in connection with a spin-off or carve-out
from another company, or in conjunction with a business combination
that satisfies the conditions in Nasdaq IM-5101-2(b) and to
companies (other than an Acquisition Company) switching their
listing from the New York Stock Exchange to the Global or Global
Select Markets. Nasdaq does not currently offer complimentary
services to companies listing on the Nasdaq Capital Market or
Acquisition Companies listing on any market tier. See IM-5900-7.
Accordingly, in certain circumstances, for a short period following
the business combination, a company may be eligible to receive
services under IM-5900-7 and proposed IM-5900-8.
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Through the global targeting tool, Nasdaq investor targeting
specialists will help focus the Company's investor relations efforts on
appropriate investors, tailor messaging to their interests and measure
the Company's impact on their holdings. The analyst team will help
develop a detailed plan aligning the targeting efforts with the
Company's long-term ownership strategy. Analysis includes addressable
risks and opportunities by region and investor type, and
recommendations for where to focus time. This service has a retail
value of approximately $44,000 per year.
Nasdaq believes that the proposed complimentary services would
provide an incentive to the Acquisition Companies to list on Nasdaq.
Nasdaq also believes it is reasonable to balance its need to remain
competitive with other listing venues, while at the same time ensuring
adequate revenue to meet its regulatory responsibilities. Nasdaq notes
that no other company will be required to pay higher fees as a result
of the proposed amendments and represents that providing this service
will have no impact on the resources available for its regulatory
programs.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Exchange Act,\8\ in general, and furthers the objectives of
Section 6(b)(5) of the Exchange Act,\9\ in particular, in that it is
designed to promote just and equitable principles of trade, to remove
impediments to and perfect the
[[Page 46761]]
mechanism of a free and open market and a national market system, and,
in general to protect investors and the public interest. Nasdaq also
believes that the proposed rule change is consistent with the
provisions of Sections 6(b)(4),\10\ 6(b)(5),\11\ and 6(b)(8),\12\ in
that the proposal is designed, among other things, to provide for the
equitable allocation of reasonable dues, fees, and other charges among
Exchange members and issuers and other persons using its facilities and
to promote just and equitable principles of trade, and is not designed
to permit unfair discrimination between issuers, and that the rules of
the Exchange do not impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Exchange Act.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ 15 U.S.C. 78f(4).
\11\ 15 U.S.C. 78f(5).
\12\ 15 U.S.C. 78f(8).
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Nasdaq faces competition in the market for listing services,\13\
and competes, in part, by offering valuable services to companies.
Nasdaq believes that it is reasonable to offer complimentary services
to attract and retain listings as part of this competition. In
particular, Nasdaq believes that it is reasonable to enhance its
competitive offering by providing all Acquisition Companies with a
complimentary global targeting tool, following the public announcement
of the business combination intended to satisfy the conditions in
Listing Rule IM-5101-2(b) until 60 days following the completion the
business combination or such time that the Acquisition Company publicly
announces that such agreement is terminated.
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\13\ The Justice Department has noted the intense competitive
environment for exchange listings. See ``NASDAQ OMX Group Inc. and
IntercontinentalExchange Inc. Abandon Their Proposed Acquisition Of
NYSE Euronext After Justice Department Threatens Lawsuit'' (May 16,
2011), available at http://www.justice.gov/atr/public/press_releases/2011/271214.htm.
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Nasdaq believes it is reasonable, and not unfairly discriminatory,
to offer the global targeting tool to Acquisition Companies following
the public announcement of the business combination that is intended to
satisfy the conditions in Listing Rule IM-5101-2(b) because at such
time Acquisition Companies will have increased need to focus on
identifying and communicating with its shareholders and prospective
investors. Once the Acquisition Company identifies the operating
business it plans to acquire, the Acquisition Company needs to focus on
targeting investors who are interested in investing in the acquired
business. Such investor targeting may help the Acquisition Company
convey the long-term vision of the acquired business to the investors
and thus diminish potential redemptions at the time of the business
combination with the operating company. Nasdaq also believes that such
diminished redemptions may help Acquisition Companies remain in
compliance with other listing requirements, including the shareholder
requirement for continued listing.\14\
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\14\ Listing Rule 5450(a)(2) requires at least 400 Total Holders
for continued listing on the Nasdaq Global Market. Listing Rule
5550(a)(3) requires at least 300 Public Holders for continued
listing on the Nasdaq Capital Market.
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At this time in the Acquisition Company's lifecycle, the companies
are transitioning to the traditional operating company model and the
complimentary global targeting tool will help ease that transition. In
addition, these companies will be eligible to receive this service for
the first time, and offering the complimentary global targeting tool
will provide Nasdaq Corporate Solutions with the opportunity to
demonstrate the value of its services and forge a relationship with the
company at a time when the new operating company is choosing its
service providers. For these reasons, Nasdaq believes it is not an
inequitable allocation of fees nor unfairly discriminatory to offer the
global targeting tool to Acquisition Companies following the public
announcement of such business combination. In addition, Nasdaq believes
it is not an inequitable allocation of fees nor unfairly discriminatory
to offer Acquisition Companies a complimentary global targeting tool
for 60 days following the completion the business combination because
it would allow for a smooth transition to the traditional operating
company model and avoid disruption of the service during such
transaction.
The Commission has previously indicated pursuant to Section 19(b)
of the Exchange Act \15\ that providing and updating the values of the
services within the rule is necessary,\16\ and Nasdaq does not believe
this indication of value has an effect on the allocation of fees nor
does it permit unfair discrimination, as all Acquisition Companies will
receive the same services. Further, this provision will enhance the
transparency of Nasdaq's rules and the value of the services it offers
Acquisition Companies, thus promoting just and equitable principles of
trade. As such, the proposed rule change is consistent with the
requirements of Section 6(b)(4) and (5) of the Exchange Act.
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\15\ 15 U.S.C. 78s(b).
\16\ See Exchange Act Release No. 72669 (July 24, 2014), 79 FR
44234 (July 30, 2014) (SR-NASDAQ-2014-058) (footnote 39 and
accompanying text: ``We would expect Nasdaq, consistent with Section
19(b) of the Exchange Act, to periodically update the retail values
of services offered should they change. This will help to provide
transparency to listed companies on the value of the free services
they receive and the actual costs associated with listing on
Nasdaq.'')
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Nasdaq represents, and this proposed rule change will help ensure,
that individual listed companies are not given specially negotiated
packages of products or services to list, or remain listed, which the
Commission has previously stated would raise unfair discrimination
issues under the Exchange Act.\17\
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\17\ See Exchange Act Release No. 79366, 81 FR 85663 at 85665
(citing Securities Exchange Act Release No. 65127 (August 12, 2011),
76 FR 51449, 51452 (August 18, 2011) (approving NYSE-2011-20)).
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B. Self-Regulatory Organization's Statement on Burden on Competition
Nasdaq does not believe that the proposed rule change will result
in any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended. As noted above,
Nasdaq faces competition in the market for listing services, and
competes, in part, by offering valuable services to companies. The
proposed rule change reflects that competition, but does not impose any
burden on the competition with other exchanges. Rather, Nasdaq believes
the proposed changes will result in Acquisition Companies being
eligible to receive the global targeting tool and therefore will
enhance competition for new listings of Acquisition Companies.
Other exchanges can also offer similar services to companies,
thereby increasing competition to the benefit of those companies and
their shareholders. Accordingly, Nasdaq does not believe the proposed
rule change will impose any burden on competition that is not necessary
or appropriate in furtherance of the purposes of the Exchange Act, as
amended.
Nasdaq also notes that Nasdaq Corporate Solutions competes with
other service providers in providing services like the global targeting
tool. To the extent that these other providers believe that Nasdaq
offering a complimentary services for a limited time creates a
competitive burden on their offerings, they are able to craft a similar
program to attract Acquisition Companies to their services.
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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. 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 within such longer period 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 Exchange consents, the Commission shall: (a) by order approve
or disapprove such 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 is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NASDAQ-2020-044 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2020-044. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street, NE, Washington,
DC 20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NASDAQ-2020-044, and should be submitted
on or before August 24, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-16709 Filed 7-31-20; 8:45 am]
BILLING CODE 8011-01-P