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Federal Register / Vol. 86, No. 39 / Tuesday, March 2, 2021 / Notices
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allow a company to also 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 adopt Listing Rule IM53152.11 This proposed rule 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 Nasdaq Global Select Market at the time of effectiveness of a registration statement pursuant to which the company itself will sell shares in the opening auction on the first day of trading on the Exchange.
In considering the initial listing of a company in connection with a Direct Listing on the Nasdaq Global Select Market, Listing Rule IM53151
currently provides that the Exchange will determine that such company has met the applicable Market Value of Unrestricted Publicly Held Shares requirements based on the lesser of: i An independent third-party valuation of the company a Valuation; 12 and ii the most recent trading price for the companys common stock in a Private Placement Market where there has been sustained recent trading. For a security that has not had sustained recent trading in a Private Placement Market 13
prior to listing, Nasdaq will determine that such Company has met the Market Value of Unrestricted Publicly Held Shares requirement if the Company satisfies the applicable Market Value of Unrestricted Publicly Held Shares requirement and provides a Valuation evidencing a Market Value of Publicly Held Shares of at least $250,000,000.
In contrast, when applying this requirement to a Direct Listing with a Capital Raise, the Exchange and investors know the minimum price at which the company can sell shares in the offering because it is included in the companys registration statement, and 11 The Commission did not identify any concerns with proposed Listing Rule IM53152 in the OIP.
Accordingly, the only change to proposed IM
53152 in this amendment is to reflect that the minimum price at which the company can sell shares is the lowest price in the price range disclosed by the issuer in its effective registration statement. In the Initial Proposal, Nasdaq proposed to allow the company to sell shares at up to a 20%
discount to the lowest price in the price range disclosed in the effective registration statement and therefore also to calculate compliance with the listing requirements based on that same price.
12 IM53151 describes the requirement for a Valuation, including the experience and independence of the entity providing the Valuation.
13 Nasdaq defines Private Placement Market in Listing Rule 5005a34 as a trading system for unregistered securities operated by a national securities exchange or a registered broker-dealer.

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therefore Nasdaq is proposing the following:
Nasdaq will calculate the value of shares, including those being sold by the company and those held by public shareholders immediately prior to the listing, using a price per share equal to the lowest price in the price range disclosed by the issuer in its registration statement.14 Nasdaq also will determine whether the company has met the applicable bid price and market capitalization requirements based on the same per share price.
In determining whether the company satisfies the Market Value of Unrestricted Publicly Held Shares for initial listing on the Nasdaq Global Select Market, the Exchange will deem such Company to have met the applicable requirement if the amount of the Companys Unrestricted Publicly Held Shares before the offering, along with the market value of the shares to be sold by the company in the Direct Listing with a Capital Raise is at least $110 million or $100 million, if the Company has stockholders equity of at least $110 million.15
Officers, directors or owners of more than 10% of the companys common stock prior to the opening auction may purchase shares sold by the company in the opening auction, provided that such purchases are not inconsistent with general anti-manipulation provisions, Regulation M, and other applicable securities laws. In addition, in the same way as for shares of a company listing following a traditional underwritten IPO, such an insider owner may purchase shares sold by other shareholders or sell its own shares in the opening auction and in trading after the opening auction, to the extent not inconsistent with general anti14 As described below, the Nasdaq Halt Cross would not execute at a price that is below the bottom of the disclosed range. Thus, this is the minimum price at which the company could list in connection with a Direct Listing with a Capital Raise.
15 See Listing Rules 5315f2A and B that require the Market Value of Unrestricted Publicly Held Shares for initial listing on the Nasdaq Global Select Market, not in connection with an IPO, of at least $110 million; or at least $100 million, if the company has stockholders equity of at least $110
million, respectively. For example, if the company is selling five million shares in the opening auction and there are 45 million shares issued and outstanding immediately prior to the listing that are eligible for inclusion as unrestricted publicly-held shares based on disclosure in the companys registration statement, then the Market Value of Unrestricted Publicly Held Shares will be calculated based on a combined total of 50 million shares. If the lowest price of the price range disclosed in the companys registration statement is $10 per share, the Exchange will attribute to the company a Market Value of Unrestricted Publicly Held Shares of $500 million, based on a $10 price per share.

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manipulation provisions, Regulation M, and other applicable securities laws.
Shares held by these types of inside investors are not included in calculations of Publicly Held Shares for purposes of Exchange listing rules except that, as proposed with respect to a Direct Listing with a Capital Raise, all shares sold by the company in the offering and all shares held by Public Holders prior to the offering will be included in the calculation of Publicly Held Shares, even if some of these shares are purchased by inside investors.16 The Exchange notes that such investors may also acquire in secondary market trades shares sold by the issuer in a Direct Listing with a Capital Raise that were included when calculating whether the issuer meets the Market Value of Unrestricted Publicly Held Shares requirement for initial listing. However, the Exchange notes that a company listing in conjunction with a Direct Listing with a Capital Raise will be required to have a Market Value of Unrestricted Publicly Held Shares much higher than the Exchanges minimum $45 million Market Value of Unrestricted Publicly Held Shares requirement for a traditional underwritten IPO.17 This heightened requirement, along with the ability of all investors to purchase shares in the opening process on the Exchange, should result in companies using a Direct Listing with a Capital Raise having adequate public float and a liquid trading market after the completion of the opening auction.
Any company listing in connection with a Direct Listing with a Capital Raise would continue to be subject to, and required to meet, all other applicable initial listing requirements, including the requirements to have the applicable number of shareholders and at least 1,250,000 Unrestricted Publicly Held Shares outstanding at the time of initial listing, and the requirement to have a price per share of at least $4.00
at the time of initial listing.18
Proposed Listing Rule IM53152 also requires that securities listing in connection with a Direct Listing with a 16 Rule
5005a35.
Listing Rules 5315f2C that requires the Market Value of Unrestricted Publicly Held Shares for initial listing on the Nasdaq Global Select Market, in connection with an IPO, of at least $45
million.
18 See Listing Rules 5315f1, e1 and 2, respectively. Rule 5315f1 requires a security to have: A At least 550 total holders and an average monthly trading volume over the prior 12 months of at least 1,100,000 shares per month; or B at least 2,200 total holders; or C a minimum of 450 round lot holders and at least 50% of such round lot holders must each hold unrestricted securities with a market value of at least $2,500.
17 See
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