On March 13, 2017, the NYSE issued a proposed rule change that would amend Section 102.01B of its Listed Company Manual to modify the provisions relating to the qualification of companies listing without a prior Exchange Act registration. The proposal requires SEC approval.

Currently, Section 102.01B recognizes that some companies that have not previously registered their common equity securities under the Exchange Act, but which have sold common equity securities in a private placement, may wish to list those securities on the NYSE at the time of effectiveness of a registration statement filed solely for the purpose of allowing existing shareholders to sell their shares. Footnote (E) of Section 102.01B provides that the NYSE will exercise its discretion to list these companies by determining that a company has met the $100 million aggregate market value of publicly-held shares requirement based on a combination of both:

The NYSE then attributes a market value of publicly-held shares to the company equal to the lesser of:

Although Footnote (E) provides for a company listing on effectiveness of a selling shareholder registration statement, it currently does not provide for a company listing in connection with the effectiveness of an Exchange Act registration statement in the absence of an initial public offering or other Securities Act registration. A company can become an Exchange Act registrant without a concurrent public offering by filing a Form 10 or an annual report (such as a Form 10-K or Form 20-F) with the SEC. Therefore, the proposal would amend Footnote (E) to state explicitly that it applies to companies listing either:

In addition, the proposed rule change notes that:

Therefore, the proposal would amend Footnote (E) to provide an exception to the private placement market trading requirement for companies with respect to which there is a recent valuation available indicating at least $250 million in market value of publicly-held shares. The valuation used for this purpose would need to be provided by an entity that has significant experience and demonstrable competence in the provision of these valuations.

Update: On May 12, 2017, the SEC designated a longer period within which to take action on the proposed rule change. As a result, the SEC has until June 29, 2017 to approve, disapprove, or institute proceedings to determine whether to disapprove the proposed rule change.

Update: On May 16, 2017, the NYSE filed Amendment No. 1, which supersedes the original proposal. The amendment is substantially identical to the original proposal except that it revises the NYSE's justification for the proposal and adds a definition for valuation agent independence.

Update: On May 24, 2017, the NYSE filed Amendment No. 2, which supersedes Amendment No. 1. Amendment No. 2 is substantially identical to Amendment No. 1 with very minor differences.

Update: On June 6, 2017, the NYSE filed Amendment No. 3, which supersedes the original filing. The amendment revises the NYSE's justification for the proposal.

Update: On June 13, 2017, the NYSE filed a proposed rule change (New Proposal) that would make related amendments to Footnote E of Section 102.01B.

Update: On June 19, 2017, the NYSE withdrew the original proposed rule change.

Update: On August 16, 2017, the NYSE filed an amendment to the New Proposal.

Update: On September 15, 2017, the SEC issued an order instituting proceedings to determine whether to approve or disapprove the New Proposal.

For more information on securities exchanges and how to select the proper exchange, see Practice Note, Selecting a US Securities Exchange.