On March 19, 2020, the New York Stock Exchange LLC (NYSE) filed a proposed rule change to suspend until June 30, 2020, the application of the NYSE continued listing requirement with respect to global market capitalization (Section 802.01B of the NYSE Listed Company Manual). The rule change is proposed in response an unusually high number of listed companies in imminent danger of immediate suspension and delisting due to the precipitous decline in equity trading prices commencing in late February 2020 as a result of COVID-19 market turbulence. The U.S. Securities and Exchange Commission (SEC) published a notice on March 20, 2020, to solicit comments until 21 days from publication in the Federal Register.
Section 802.01B states that a listed company will be considered to be below compliance of this continued listing standard if its average global market capitalization over a consecutive 30 trading-day period is less than $50 million and at the same time stockholders’ equity is less than $50 million. Notwithstanding the foregoing, the NYSE will promptly initiate suspension and delisting procedures with respect to a listed company if such company is determined to have average global market capitalization over a consecutive 30 trading-day period of less than $15 million (“Market Capitalization Standard”). When a company is identified as being noncompliant with the Market Capitalization Standard, trading in its securities is immediately suspended and the company is subject to delisting. Under the proposed temporary suspension of the Market Capitalization Standard, companies would not be notified of new events of noncompliance with the Market Capitalization Standard during the suspension period.
The proposed suspension of the Market Capitalization Standard will not affect the status of any company that already has been formally notified for noncompliance with the Market Capitalization Standard and is currently in the NYSE’s delisting appeal process prior to March 19, 2020.
The proposed rule change does not impact the minimum price condition under Section 802.01C of the Listed Company Manual, which states that a listed company will be considered to be out of compliance with this continued listing standard if the average closing price of a security as reported on the consolidated tape is less than $1.00 over a consecutive 30 trading-day period.
The NYSE has asked the SEC to waive the 30-day operative delay so that the proposed rule change may become operative immediately upon filing, as of March 19, 2020, to reduce uncertainty for certain companies and their shareholders regarding the ability of certain securities to remain listed on the NYSE during the current highly unusual market conditions, as supported by the unprecedented occurrence of four Level 1 Market Wide Circuit Breaker Halts during March 2020.
