Choose Site

LawFlash

COVID-19 Market Volatility: The NYSE Suspends Minimum Share Price and Market Capitalization Continued Listing Requirements

April 27, 2020

The New York Stock Exchange LLC (NYSE) has temporarily suspended its continued listing standards requiring (i) a market capitalization and stockholders’ equity of at least $50 million each, and (ii) a $1 minimum trading price for listed issuers. This relief, effective immediately through June 30, 2020, provides issuers with additional time to regain compliance with these requirements, and supplements the temporary suspension of the $15 million minimum market capitalization requirement.

The NYSE’s temporary relief, effective April 20, 2020, comes in response to the coronavirus (COVID-19) pandemic and related extraordinary market conditions.[1] This temporary relief is in addition to the ongoing suspension, through June 30, 2020, of the $15 million market capitalization standard effective March 20, 2020.

What Are the NYSE’s Price-Based Continued Listing Standards?

NYSE-listed issuers are required to maintain, over a consecutive 30-trading-day period, (i) an average closing price per share of at least $1 (the Dollar Price Standard) and (ii) an average global market capitalization of at least $50 million and stockholders’ equity of at least $50 million (the $50 Million Standard).[2]

An NYSE-listed issuer that has become noncompliant with the Dollar Price Standard and/or the $50 Million Standard may cure such noncompliance over maximum cure periods of six months and 18 months, respectively. However, notwithstanding the 18-month $50 Million Standard cure period, if an issuer becomes noncompliant with the separate requirement that it maintain an average global market capitalization over a consecutive 30-trading-day period of at least $15 million (the $15 Million Standard), the NYSE will promptly initiate trading suspension and delisting procedures, without any available cure period.[3]

How Is the NYSE Providing Relief for Price-Based Continued Listing Standards?

Effective immediately and through June 30, 2020, the NYSE has tolled all compliance periods for the Dollar Price Standard, $50 Million Standard, and $15 Million Standard (together, Price-Based Continued Listing Standards), as follows.

Dollar Price Standard

  • For issuers that become newly noncompliant with the Dollar Price Standard between now and June 30, 2020, the six-month compliance period will be tolled until July 1, 2020. All issuers newly identified as noncompliant will have until January 1, 2021 (i.e., six months from July 1, 2020) to regain compliance.
  • For issuers that are currently in an existing six-month compliance period, the compliance period will be paused through June 30, 2020, and will start again on July 1, 2020. Issuers will then have the balance of their compliance period to comply with the Dollar Price Standard. For example, if an issuer is currently two months into its six-month compliance period, then on July 1, 2020, the issuer will have four months to regain compliance.

$50 Million Standard

  • For issuers that become newly noncompliant with the $50 Million Standard between now and June 30, 2020, the 18-month compliance period will not start until July 1, 2020. All issuers newly identified as noncompliant will have until January 1, 2022 (i.e., 18 months from July 1, 2020) to regain compliance.
  • For issuers that are currently in an existing 18-month compliance period, the compliance period will be paused through June 30, 2020, and will start again on July 1, 2020. Issuers will then have the balance of their compliance period to comply with the $50 Million Standard. For example, if an issuer is currently two months into its 18-month compliance period, then on July 1, 2020, the issuer will still have the remaining 16 months to regain compliance.

$15 Million Standard

  • For issuers that become newly noncompliant with the $15 Million Standard between now and June 30, the NYSE will not start the prompt trading suspension and delisting process until July 1, 2020. The NYSE will not continue to monitor for and notify issuers about instances of noncompliance with the $15 Million Standard.
  • For issuers that are currently in noncompliance with the $15 Million Standard, and are thus in the delisting process, the temporary relief does not apply. The NYSE will resume monitoring for noncompliance on July 1, 2020, and will initiate trading suspension and delisting procedures for any issuers in noncompliance after that date.

For the duration of the applicable relief period(s), the NYSE will continue to monitor noncompliance of the Dollar Price Standard and/or $50 Million Standard and will continue to send notices of such noncompliance to issuers. Issuers that receive notices of noncompliance will need to meet the applicable press release requirements and Form 8-K filing requirements. Additionally, the NYSE will continue to append a .BC indicator to such issuers’ tickers when providing data to the consolidated tape.

During the compliance period for either the Dollar Price Standard or the $50 Million Standard, an issuer must present to the NYSE a compliance plan (Compliance Plan) advising of definitive action the issuer has taken, or is taking, that would restore compliance with the NYSE’s continued listing standards. If the NYSE does not accept the Compliance Plan, it will promptly initiate trading suspension and delisting procedures.[4] Issuers will still be required to submit Compliance Plans within the applicable timeframes during the tolling period. The NYSE will continue to review Compliance Plans, as well as the progress made under such Compliance Plans with respect to the $50 Million Standard, on a quarterly basis during the tolling period. Further, compliance may be achieved during the tolling period. The NYSE retains the authority to immediately suspend the trading of, and delist, an issuer’s securities if the issuer fails to meet the material aspects or any quarterly milestone of a Compliance Plan.

The NYSE will not continue to monitor noncompliance with the $15 Million Standard.

NYSE Listed Company Manual Section

Listing Requirement

 

 

Compliance Period

(Pre- Temporary Relief)

 

 

Compliance Period

(During Temporary Relief)

802.01C

Dollar Price Standard

Six-month cure period

Six-month cure period tolled through June 30, 2020.

Issuers that were previously in noncompliance will have their already-running six-month cure period paused through June 30, 2020.

 

Issuers that become newly noncompliant will start their six-month cure period on July 1, 2020.

802.01B

$50 Million Standard

18-month cure period

18-month cure period tolled through June 30, 2020.

Issuers that were previously in noncompliance will have their already-running 18-month cure period paused through June 30, 2020.

 

Issuers that become newly noncompliant will start their 18-month cure period on July 1, 2020.

802.01B

$15 Million Standard

None (prompt suspension and delisting of securities)

The tolling period only applies to newly noncompliant issuers.

The NYSE will not initiate a new trading suspension and delisting process until after July 1, 2020.

 

For issuers that were in the process of being delisted for noncompliance with the $15 Million Standard prior to the relief order, the tolling period does not apply. The delisting process will continue.

Form 8-K Considerations

Issuers that are currently noncompliant with the Dollar Price Standard or $50 Million Standard and have already filed a current report on Form 8-K reporting the receipt of a notice of noncompliance from the NYSE under Item 3.01 might consider voluntarily updating their previous Item 3.01 disclosures.[5] Issuers can do so by either amending the prior Form 8-K or filing a new Item 3.01 Form 8-K.

In addition, issuers may wish to update any previously issued press releases accordingly. Meanwhile, issuers that receive a new notice of noncompliance from the NYSE must still report the notice under Item 3.01 of Form 8-K within four business days of receipt.[6]

Related Nasdaq Developments

Please refer to our LawFlash for corresponding developments for Nasdaq-listed issuers.

Coronavirus COVID-19 Task Force

For our clients, we have formed a multidisciplinary Coronavirus COVID-19 Task Force to help guide you through the broad scope of legal issues brought on by this public health challenge. We also have launched a resource page to help keep you on top of developments as they unfold. If you would like to receive a daily digest of all new updates to the page, please subscribe now to receive our COVID-19 alerts.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Boston
Laurie Cerveny
Michael Conza
Bryan Keighery
Carl Valenstein
Julio Vega

Frankfurt
Torsten Schwarze

Hong Kong
June Chan
Rosita Chu
Eli Gao
Louise Liu
Edwin Luk
Billy Wong

London
Thomas J. Cartwright
Timothy J. Corbett
Iain Wright

Moscow/London
Carter Brod

New York
Thomas P. Giblin, Jr.
John T. Hood
Christopher T. Jensen
Howard A. Kenny
Jeffrey A. Letalien
Christina Melendi
Finnbarr D. Murphy
David W. Pollak
Kimberly M. Reisler

Palo Alto
Albert Lung

Philadelphia
Justin W. Chairman
James W. McKenzie
Alan Singer
Joanne R. Soslow

Pittsburgh
Celia Soehner

Princeton
David C. Schwartz

Singapore
Bernard Lui
Joo Khin Ng

Washington, DC
Sean Donahue
Keith E. Gottfried
Linda L. Griggs
David A. Sirignano
George G. Yearsich


[1] In its notice of the rule change, the NYSE noted it has “experienced an unusually high number (as compared to historical levels) of listed companies: [1] that have been designated, or may soon be designated, as below compliance with continued listing standards, as set forth in Section 802.01B … or [2] that have stock prices that have fallen below [its] $1.00 price requirement for capital and common stock set forth in Section 802.01C,” and that the “the number of listed companies with a trading price below $1.00 as of [April 20, 2020] is approximately 10 times as many as was the case on the last trading day of 2019.”

[2] See NYSE Listed Company Manual Sections 802.01C (for the Dollar Price Standard) and 802.01B (for the $50 Million Standard and the $15 Million Standard).

[3] See NYSE Listed Company Manual Section 802.01B.

[4] See NYSE Listed Company Manual Section 802.02.

[5] Under Instruction 3 to Item 3.01 of Form 8-K, notices or other communications subsequent to an initial notice that continue to indicate that the issuer does not comply with the same rule or standard for continued listing that was the subject of the initial notice need not be filed; however, issuers may file voluntarily.

[6] Per Instruction 2 to Item 3.01 of Form 8-K, disclosure is still required even if the issuer has the benefit of a grace period or similar extension period during which it may cure the deficiency that triggers the disclosure requirement.