[Federal Register Volume 75, Number 216 (Tuesday, November 9, 2010)]
[Notices]
[Pages 68846-68848]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-28247]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63239; File No. SR-NASDAQ-2010-137]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing of Proposed Rule Change To Amend IM-5101-2 To Provide
Acquisition Companies the Option To Hold a Tender Offer in Lieu of a
Shareholder Vote on a Proposed Acquisition
November 3, 2010.
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 October 22, 2010, The NASDAQ Stock Market LLC (``Nasdaq'') 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 Nasdaq. The Commission is publishing this notice
to solicit 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 the
Substance of the Proposed Rule Change
Nasdaq proposes to provide acquisition companies an option to hold
a tender offer in lieu of a shareholder vote on a proposed acquisition.
Proposed new language is in italics; proposed deletions are in
[brackets].\3\
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\3\ Changes are marked to the rule text that appears in the
electronic manual of Nasdaq found at http://nasdaqomx.cchwallstreet.com.
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IM-5101-2. Listing of Companies Whose Business Plan is to Complete One
or More Acquisitions
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 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, Nasdaq will permit the listing if the
Company meets all applicable initial listing requirements, as well
as the conditions described below.
(a)-(c) No change.
(d) Until the Company has satisfied the condition in paragraph
(b) above, if the Company holds a shareholder vote on a business
combination for which the Company must file and furnish a proxy or
information statement subject to Regulation 14A or 14C under the Act
in advance of the shareholder meeting, the[each] business
combination must be approved by a majority of the shares of common
stock voting at the meeting at which the combination is being
considered. If a shareholder vote on the business combination is
held,
[(e) Until the Company has satisfied the condition in paragraph
(b) above,] public Shareholders voting against a business
combination must have the right to convert their shares of common
stock into a pro rata share of the aggregate amount then in the
deposit account (net of taxes payable and amounts distributed to
management for working capital purposes) if the business combination
is approved and consummated. A Company may establish a limit (set no
lower than 10% of the shares sold in the IPO) as to the maximum
number of shares with respect to which any Shareholder, together
with any affiliate of such Shareholder or any person with whom such
shareholder is acting as a ``group'' (as such term is used in
Sections 13(d) and 14(d) of the Act), may exercise such conversion
rights. For purposes of this paragraph [(e)] (d), public Shareholder
excludes officers and directors of the Company, the Company's
sponsor, the founding Shareholders of the Company, and any Family
Member or affiliate of any of the foregoing persons, or the
beneficial holder of more than 10% of the total shares outstanding.
Until the Company completes a business combination where all
conditions in paragraph (b) above are met, the Company must notify
Nasdaq on the appropriate form about each proposed business
combination. Following each business combination, the combined
Company must meet the requirements for initial listing. If the
Company does not meet the requirements for initial listing following
a business combination or does not comply with one of
[[Page 68847]]
the requirements set forth above, Nasdaq will issue a Staff
Delisting Determination under Rule 5810 to delist the Company's
securities.
(e) Until the Company has satisfied the condition in paragraph
(b) above, if a shareholder vote on the business combination is not
held for which the Company must file and furnish a proxy or
information statement subject to Regulation 14A or 14C under the
Act, the Company must provide all Shareholders with the opportunity
to redeem all their shares for cash equal to their pro rata share of
the aggregate amount then in the deposit account (net of taxes
payable and amounts distributed to management for working capital
purposes), pursuant to Rule 13e-4 and Regulation 14E under the Act,
which regulate issuer tender offers. The Company must file tender
offer documents with the Commission containing substantially the
same financial and other information about the business combination
and the redemption rights as would be required under Regulation 14A
of the Act, which regulates the solicitation of proxies. Until the
Company completes a business combination where all conditions in
paragraph (b) above are met, the Company must notify Nasdaq on the
appropriate form about each proposed business combination. Following
each business combination, the combined Company must meet the
requirements for initial listing. If the Company does not meet the
requirements for initial listing following a business combination or
does not comply with one of the requirements set forth above, Nasdaq
will issue a Staff Delisting Determination under Rule 5810 to delist
the Company's securities.
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, Nasdaq 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. Nasdaq 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 March 2009, Nasdaq adopted rules to permit the listing of
companies whose business plan was 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'' or ``SPACs'').\4\ These listing requirements included
additional protections designed to protect investors from certain risks
unique to this type of company, including that the Acquisition Company
obtain a vote of shareholders prior to consummating any acquisition and
offer shareholders voting against the acquisition the ability to redeem
their shares in exchange for a pro rata share of the cash held by the
Acquisition Company.\5\ Similar protections have been voluntarily
adopted by other Acquisition Companies that have not listed on Nasdaq.
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\4\ IM-5101-2.
\5\ The Listing Rules also require that at least 90% of the
gross proceeds from the SPAC's initial public offering and any
concurrent sale of equity securities must be deposited in a trust
account; that within 36 months of the effectiveness of the SPAC's
IPO registration statement, the SPAC must complete one or more
business combinations having an aggregate fair market value of at
least 80% of the value of the deposit account; and, that each
business combination must be approved by a majority of the SPAC's
independent directors.
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As a result of the required vote, in a number of cases, hedge funds
and other activist investors acquired an interest in an Acquisition
Company and used their ability to vote against a proposed acquisition
as leverage to obtain additional consideration not available to other
shareholders. For example, they may negotiate the sale of their stake
to an affiliate of the Acquisition Company's management for a price
higher than their pro rata share of the deposit account. In other
cases, the withheld votes caused the proposed acquisition to fail
altogether. In order to prevent this type of ``greenmail,'' recent
Acquisition Companies, which went public and did not list on an
exchange, adopted a modified structure under which they would not seek
a vote on the acquisition, unless otherwise required by law. Instead,
these Acquisition Companies would conduct a redemption offer pursuant
to Rule 13e-4 and Regulation 14E under the Act after the public
announcement and prior to the completion of the business combination,
enabling shareholders who are opposed to the transaction to tender
their shares in exchange for a pro rata share of the cash held by the
Acquisition Company. This is the same outcome available to public
Shareholders who vote against the acquisition pursuant to Nasdaq's
existing rule.
Under this new alternative, shareholders would still maintain the
ability to ``vote with their feet'' if they oppose a proposed
transaction and would, as just noted, also obtain their pro rata share
of the Acquisition Company's cash through the tender offer pursuant to
Rule 13e-4 and Regulation 14E under the Act. As such, Nasdaq believes
that the protections provided by the existing rule would continue to be
available. Further, this tender offer alternative would help prevent
shareholders who support the acquisition and elect to retain their
shares from being denied the benefits of the transaction by the actions
of the activist investors. Accordingly, Nasdaq proposes to modify IM-
5201-2 to allow an Acquisition Company to conduct a tender offer for
all shares of all Shareholders \6\ in exchange for a pro rata share of
the cash held in trust by the Acquisition Company in compliance with
Rule 13e-4 and Regulation 14E under the Act instead of soliciting a
shareholder vote.
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\6\ The term ``Shareholder'' is defined broadly by Rule
5005(a)(37) as ``a record or beneficial owner of a security listed
or applying to list.''
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In addition, the proposed rule change would require an Acquisition
Company that is not subject to the Commission's proxy rules to conduct
a tender offer for shares in exchange for a pro rata share of the cash
held in trust by the Acquisition Company in compliance with Rule 13e-4
and Regulation 14E under the Act and provide information similar to
that required by the Commission's proxy rules, even if the Acquisition
Company seeks a shareholder vote. This change will assure that
investors, in all cases, get comparable information about the proposed
transaction.
Last, Nasdaq is amending paragraph (d) of IM-5101-2 to include
within the definition of ``public Shareholder,'' for purposes of the
paragraph, the beneficial holder of more than 10% of the total shares
outstanding. The term ``public Shareholder'' was meant to closely
mirror the defined term ``Public Holders,'' but to also include
Acquisition Company-specific classifications as well. Public Holders is
defined by the Listing Rules as holders of a security that includes
both beneficial holders and holders of record, but does not include any
holder who is, either directly or indirectly, an Executive Officer,
director, or the beneficial holder of more than 10% of the total shares
outstanding.\7\ Accordingly, Nasdaq is making the rule clear by adding
language consistent with the definition of Public Holders.
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\7\ Rule 5005(a)(34).
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2. Statutory Basis
Nasdaq believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act,\8\ in general and with Section
6(b)(5) of the
[[Page 68848]]
Act,\9\ in particular in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest. The proposed rule change is
consistent with these requirements in that it provides an alternative
mechanism for an acquisition vehicle to complete a transaction in a
manner that minimizes the disruptive effect of certain shareholders,
while maintaining protections which are designed to protect investors
and the public interest and prevent fraudulent and manipulative acts
and practices.
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\8\ 15 U.S.C. 78f.
\9\ 15 U.S.C. 78f(b)(5).
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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.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor 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 self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove the 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 e-mail to [email protected]. Please include
File Number SR-NASDAQ-2010-137 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2010-137. This
file number should be included on the subject line if e-mail 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 Web site (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 Web site
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 a.m. and 3 p.m. Copies of such filing also will be
available for inspection and copying at the principal office of the
Exchange. All comments received will be posted without change; the
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
NASDAQ-2010-137 and should be submitted on or before November 30, 2010
in the Federal Register.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-28247 Filed 11-8-10; 8:45 am]
BILLING CODE 8011-01-P