
[Federal Register: May 13, 2008 (Volume 73, Number 93)]
[Notices]               
[Page 27597-27601]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13my08-105]                         


[[Page 27597]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57785; File No. SR-NYSE-2008-17]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; Order 
Approving Proposed Rule Change To Adopt New Initial and Continued 
Listing Standards To List Securities of Special Purpose Acquisition 
Companies

May 6, 2008.

I. Introduction

    On March 6, 2008, the New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to adopt new initial and continued listing 
standards to list securities of special purpose acquisition companies 
(``SPACs''). The proposed rule change was published in the Federal 
Register on March 21, 2008.\3\ The Commission received no comments on 
the proposal. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 57499 (March 14, 
2008), 73 FR 15246.
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II. Description of the Proposal

    The Exchange has proposed to amend its Listed Company Manual 
(``Manual'') to adopt new initial and continued listing standards to 
list securities of SPACs. In its proposal, NYSE generally described the 
structure of SPACs.\4\ NYSE notes that SPACs raise capital in an 
initial public offering (``IPO'') to enter into future undetermined 
business combinations through mergers, capital stock exchanges, asset 
acquisitions, stock purchases, reorganizations or other similar 
business combinations with one or more operating businesses or assets. 
In the IPO, SPACs typically sell units consisting of one share of 
common stock and one or more warrants (or a fraction of a warrant) to 
purchase common stock, that are separable at some point after the IPO. 
Further, NYSE notes that the management of the SPAC generally receives 
a percentage of the equity and may be required to purchase additional 
shares in a private placement at the time of the IPO. Because of the 
structure of SPACs, they do not have any prior financial history, 
unlike operating companies.
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    \4\ See id.
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    The Exchange proposes to adopt new Section 102.06 of the Manual for 
the initial listing standards for securities of SPACs. NYSE's existing 
listing rules require all listed companies to have some operating 
history prior to listing. The proposed standards, as described below, 
would allow the listing of securities of SPACs with no prior operating 
history, a departure from NYSE's current listing requirements.
    The Exchange also proposes to amend the Manual to require that: (1) 
Any equity security listing on the Exchange must have a closing price 
or, if listing in connection with an IPO, an IPO price per share of at 
least $4 at the time of initial listing; and (2) convertible debt 
issuances listed on the Exchange must have an aggregate market value or 
principal amount of no less than $10,000,000.

A. Initial Listing Standards for Securities of SPACs

    As proposed, SPACs would have to meet the same distribution 
criteria as all other IPOs-400 holders of round lots and 1,100,000 
publicly held shares.\5\ In addition, SPACs would have to meet all of 
the Exchange's corporate governance requirements applicable to 
operating companies. Under the proposal, SPACs would also need to 
demonstrate an aggregate market value of $250,000,000 and a market 
value of publicly held shares of $200,000,000, as well as meet the new 
$4 price requirement applicable to all equity securities listing on the 
Exchange.\6\ Further, SPACs would be required under the proposed rules 
to keep at least 90% of the proceeds, together with the proceeds of any 
other concurrent sales of the SPACs' equity securities, in a trust 
account. An independent custodian would be required to control the 
trust account until consummation of a business combination in the form 
of a merger, capital stock exchange, asset acquisition, stock purchase, 
reorganization, or similar business combination, with one or more 
operating businesses or assets with a fair market value equal to at 
least 80% of the net assets in the trust (minus working capital and 
deferred underwriting discount) (``Business Combination'').
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    \5\ See Manual Section 102.01A.
    \6\ NYSE would exclude shares held by directors, officers, or 
their immediate families and other concentrated holdings of 10% or 
more in calculating the number of publicly held shares. For SPACs 
that list securities at the time of their IPOs, if necessary, the 
Exchange would rely on a written commitment from the underwriter to 
represent the anticipated value of the offering in order to 
determine compliance.
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    The proposal would also require that under the terms of the SPAC's 
constitutive documents or by contract, any SPAC deemed suitable for 
listing would be subject to the following minimum requirements.
     The Business Combination must be approved by a majority 
vote of the votes cast by public shareholders at a duly held 
shareholders meeting.
     Each public shareholder voting against the Business 
Combination will have the right (``Conversion Right'') to convert its 
shares of common stock into a pro rata share of the aggregate amount 
then on deposit in the trust account (net of taxes payable and amounts 
disbursed to management for working capital purposes), provided that 
the Business Combination is approved and consummated. SPACs 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 public 
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) \7\ and 14(d) \8\ of the Act), may 
exercise Conversion Rights.\9\
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    \7\ 15 U.S.C. 78m(d).
    \8\ 15 U.S.C. 78n(d).
    \9\ For example, a SPAC which sells 10,000,000 shares in its IPO 
could limit the exercise of Conversion Rights by any one holder to 
10% of that amount, or a maximum of 1,000,000 shares.
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     The SPAC cannot consummate its Business Combination if 
public shareholders owning in excess of a threshold amount (to be set 
no higher than 40% by the SPAC) of the shares of common stock issued in 
the IPO exercise their Conversion Rights in connection with such 
Business Combination.
     The SPAC would be liquidated if a Business Combination has 
not been consummated within a specified time period, not to exceed 
three years. Under the proposal, NYSE must promptly commence delisting 
procedures with respect to the securities of any SPAC that fails to 
consummate a Business Combination within (i) the time period specified 
by its constitutive documents or by contract, or (ii) three years, 
whichever is shorter.
     The SPAC's founding shareholders must waive their rights 
to participate in any liquidation distribution with respect to all 
shares of common stock owned by each of them prior to the IPO or 
purchased in any private placement occurring in conjunction with the 
IPO, including the common stock underlying any founders' warrants. In 
addition, the

[[Page 27598]]

underwriters of the IPO must agree to waive their rights to any 
deferred underwriting discount deposited in the trust account in the 
event the SPAC liquidates prior to the completion of a Business 
Combination.\10\
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    \10\ In the event of liquidation, the pro rata share of the 
trust account to be paid to the holder of each publicly held share 
would be calculated in accordance with the law of the SPAC's state 
of incorporation. However, the actual amount paid to the public 
shareholders could vary depending on a variety of factors as 
disclosed in the IPO prospectus, such as liquidation expenses, or 
indemnification obligations.
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    If the securities of the SPAC are listed as units, the components 
of the units (other than common stock) would be required to meet the 
applicable initial listing standards for the security types represented 
by the components.\11\
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    \11\ For example, a component that is a warrant will be subject 
to the initial listing standards for warrants set forth in Section 
703.12 of the Manual.
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    Under the proposal, the Exchange has discretion to consider these 
listings on a case-by-case basis, and would consider the following 
factors in its decision:
     The experience and track record of management;
     the amount of time permitted for the completion of the 
Business Combination prior to the mandatory dissolution of the SPAC;
     the nature and extent of management compensation;
     the extent of management's equity ownership in the SPAC 
and any restrictions on management's ability to sell SPAC stock;
     the percentage of the contents of the trust account that 
must be represented by the fair market value of the Business 
Combination;
     the percentage of voting publicly held shares whose votes 
are needed to approve the Business Combination;
     the percentage of the proceeds of sales of the SPAC's 
securities that is placed in the trust account; and
     such other factors as the Exchange believes are consistent 
with the goals of investor protection and the public interest.

B. Continued Listing Standard of SPACs

    The Exchange also proposes to amend Section 802.01B of the Manual 
for the continued listing standards for securities of SPACs.
1. Prior to a Business Combination
    Prior to the consummation of a Business Combination, NYSE would 
promptly initiate suspension and delisting procedures if:
     The SPAC's average aggregate global market capitalization 
is below $125,000,000 or the average aggregate global market 
capitalization attributable to its publicly held shares is below 
$100,000,000, in each case over 30 consecutive trading days; \12\
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    \12\ The Exchange would notify the SPAC if the average aggregate 
global market capitalization falls below $150,000,000 or the average 
aggregate global market capitalization of publicly held shares falls 
below $125,000,000, and would advise the SPAC of the delisting 
standard. A SPAC would not be eligible to follow the procedures 
outlined in Sections 802.02 and 802.03 of the Manual with respect to 
this criterion (allowing the issuer to establish a plan to cure any 
deficiencies), and the SPAC would be subject to the delisting 
procedures in Section 804 of the Manual.
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     the SPAC's securities initially listed (either common 
stock or units) fall below the following distribution criteria:
    (1) The number of total stockholders \13\ is less than 400; or
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    \13\ The number of beneficial holders of stock held in the name 
of Exchange member organizations will be considered in addition to 
holders of record.
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    (2) the number of total stockholders \14\ is less than 1,200 and 
average monthly trading volume is less than 100,000 shares (for the 
most recent 12 months); or
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    \14\ See id.
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    (3) the number of publicly held shares \15\ is less than 
600,000;\16\ or
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    \15\ Shares held by directors, officers, or their immediate 
families and other concentrated holdings of 10% or more are excluded 
in calculating the number of publicly held shares.
    \16\ If the unit of trading is less than 100 shares, the 
requirement relating to the number of publicly held shares would be 
reduced proportionately. Securities of SPACs trading as a unit would 
be subject to suspension and delisting if any of the component parts 
does not meet the applicable listing standards. If one or more of 
the components is otherwise qualified for listing, such component(s) 
may remain listed. To determine whether an individual component 
satisfies the applicable distribution criteria, the units that are 
intact and freely separable into their component parts would be 
counted toward the total numbers required for continued listing of 
the component. If a component is a warrant, it would be subject to 
the continued listing standards for warrants set forth in Section 
802.01D of the Manual, including a continued distribution 
requirement of 100 holders. Nevertheless, under the proposal NYSE 
has broad discretion to consider the delisting of any individual 
component or unit if the Exchange believes the extent of public 
distribution or the aggregate market value of such component or unit 
has become so reduced as to make continued listing on the Exchange 
inadvisable. The Exchange would consider the trading characteristics 
of such component or unit and whether it would be in the public 
interest for trading to continue, in reviewing the advisability of 
the continued listing of an individual component or unit.
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     the SPAC fails to consummate a Business Combination within 
the time period specified by its constitutive documents or required by 
contract, or three years, whichever is shorter.
    The continued listing standards set forth in Sections 801 
(``Policy''), 802.01C (``Price Criteria for Capital or Common Stock''), 
802.01D (``Other Criteria'') and 802.01E (``SEC Annual Report Timely 
Filing Criteria'') of the Manual would also apply to SPACs, in the same 
way those provisions apply to other equity securities.
2. At the Time of the Business Combination
    After shareholders approve a Business Combination, but prior to its 
consummation, the Exchange would consider whether the continued listing 
of the securities of the SPAC, after the consummation of the Business 
Combination, would be in the best interests of the Exchange and the 
public interest. NYSE would have the discretion to delist securities of 
the SPAC prior to consummation of the Business Combination. A SPAC 
would not be eligible to follow the procedures to cure the deficiencies 
outlined in Sections 802.02 and 802.03 of the Manual, and would be 
subject to delisting procedures as set forth in Section 804 of the 
Manual.
3. Continued Listing Standard Applicable to SPACs After Business 
Combination
    After consummation of a Business Combination, the SPAC would be 
subject to Sections 801 and 802.01\17\ of the Manual in their entirety 
and would be considered to be below compliance if it does not meet the 
continued listing standards applicable to operating companies listed 
under the Exchange's Earnings Test in Section 802.01B of the Manual--if 
average global market capitalization over a consecutive 30-day period 
is less than $75,000,000, and stockholders' equity is less than 
$75,000,000.\18\
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    \17\ Section 802.01 of the Manual contains minimum holder, 
trading volume, and/or number of publicly held shares requirements.
    \18\ Section 802.01B of the Manual establishes separate 
continued listing standards for companies that qualified to list 
under each of the Exchange's four separate initial listing standards 
for operating companies: (1) The Earnings Test; (2) the Valuation/
Revenue with Cash Flow Test; (3) the Pure Valuation/Revenue Test; 
and (4) the Affiliated Company Test. NYSE noted that since it cannot 
predict the standard that would be most appropriate to a SPAC after 
a Business Combination, the Exchange would apply the Earnings Test 
to all post-Business Combination SPACs. In the event that the post-
Business Combination SPAC could not meet the Earnings Test continued 
listing standards, under Section 802.02 of the Manual, if the SPAC 
could qualify under another original listing standard, its 
securities would remain listed on NYSE.
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4. Application of ``Back Door Listing'' Rule to SPACs Upon Consummation 
of Business Combination
    When a SPAC consummates a Business Combination, the Exchange would 
consider whether the Business Combination gives rise to a ``back door

[[Page 27599]]

listing'' as described in Section 703.08(E) of the Manual (i.e., 
whether NYSE believes the transaction constitutes an acquisition of the 
SPAC by an unlisted company). Under this provision, when a transaction 
is deemed a backdoor listing, Section 703.08(E) of the Manual would 
require the resulting company to meet the standards for original 
listing. If the resulting company could not qualify for original 
listing, NYSE will refuse to list additional shares of the listed SPAC 
for the transaction and the SPAC would be delisted.\19\
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    \19\ Section 703.08(E) of the Manual also states: ``In applying 
the above policy, consideration will be given to all factors 
including changes in ownership of the listed company, changes in 
management, whether the size of the company being `acquired' is 
larger than the listed company and whether the two businesses are 
related on a horizontal or a vertical basis. All circumstances will 
be considered collectively and weight may be given to compensating 
factors.''
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C. Minimum Closing Price Requirement for New Listings

    The Exchange also proposes to adopt a requirement that any equity 
security listing on the Exchange must have a closing price or, if 
listing in connection with an IPO, an IPO price per share of at least 
$4 at the time of initial listing.\20\
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    \20\ See infra note 30.
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D. Minimum Value of New Listings of Convertible Debt

    The Exchange also proposes to adopt a requirement that any 
convertible debt issuance listed on the Exchange must at the time of 
listing have an aggregate market value or principal amount of no less 
than $10,000,000.\21\
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    \21\ See infra note 31.
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III. Discussion

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange and, in 
particular, the requirements of Section 6(b) of the Act and the rules 
and regulations thereunder. Specifically, the Commission finds that the 
proposal is consistent with Section 6(b)(5) of the Act,\22\ which 
requires that an exchange have rules designed, among other things, to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, to protect investors and the public interest, and to not 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.\23\
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    \22\ 15 U.S.C. 78f(b)(5).
    \23\ In approving this proposed rule change, the Commission 
notes that it has considered the proposed rules' impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    The development and enforcement of adequate standards governing the 
initial and continued listing of securities on an exchange is an 
activity of critical importance to financial markets and the investing 
public. Listing standards, among other things, serve as a means for an 
exchange to screen issuers and to provide listed status only to bona 
fide companies that have or, in the case of an IPO, will have 
sufficient public float, investor base, and trading interest to provide 
the depth and liquidity necessary to promote fair and orderly markets. 
Adequate standards are especially important given the expectations of 
investors regarding exchange trading and the imprimatur of listing on a 
particular market. Once a security has been approved for initial 
listing, maintenance criteria allow an exchange to monitor the status 
and trading characteristics of that issue to ensure that it continues 
to meet the exchange's standards for market depth and liquidity so that 
fair and orderly markets can be maintained.
    As stated at the outset, SPACs are essentially shell companies that 
raise capital in IPOs, with the purpose of purchasing operating 
companies or assets within a certain time frame. The proceeds of the 
IPOs are placed in an escrow account during this period. SPACs usually 
require a majority of shareholders to approve any Business Combination. 
If shareholders do not approve a deal within the relevant time frame, 
shareholders have the option to demand their investment be returned 
from the escrow account. Management of the SPAC typically invests its 
own money in the SPAC--generally 2% to 4%--which generally is forfeited 
if a Business Combination is not consummated. If a Business Combination 
is consummated, management typically receives up to a 20% interest in 
the resulting company. The securities sold in the IPO generally consist 
of a unit made up of one share of common stock and a warrant (or 
fraction of a warrant) to purchase common stock. The common stock and 
warrants may be traded separately after the IPO.
    As discussed in more detail below, the proposed standards would 
permit NYSE to list securities of SPACs that meet specified criteria, 
including market value, distribution, and price requirements, which 
should help to ensure that the securities have sufficient public float, 
investor base, and liquidity to promote fair and orderly markets. In 
addition, SPACs would have to meet other investor protection criteria, 
such as the escrow account requirement, public shareholder approval 
requirement, public shareholder redemption rights, and public 
shareholder liquidation preferences, which should further the ability 
of investors to protect and monitor their investment pending a Business 
Combination. Finally, SPACs that list securities on NYSE would have to 
comply with all NYSE corporate governance requirements and distribution 
criteria applicable to operating companies.

A. Initial Listing Standards for SPACs

    The Commission believes that the Exchange's proposed initial 
listing standards to list SPAC securities are consistent with the 
requirements of the Act, including the protection of investors and the 
promotion of fair and orderly markets. SPACs that list securities on 
the NYSE would need to deposit at least 90% of the IPO proceeds in a 
trust account controlled by an independent custodian. Under the listing 
standards, the proceeds would be under control of the independent 
custodian until consummation of a Business Combination with one or more 
operating companies that, among other things, have a fair market value 
equal to at least 80% of the net assets held in trust.\24\ Public 
shareholders must vote to approve the Business Combination, and the 
listing standards contain, for those public shareholders voting against 
the Business Combination, certain Conversion Rights for the return of 
their initial investment on a pro rata basis (net of certain expenses). 
Some of the NYSE's proposed requirements, such as the Conversion 
Rights, are similar in some respects to the investor protection 
measures contained in Rule 419 under the Securities Act of 1933 with 
respect to blank check companies.\25\ SPACs that list securities on 
NYSE would also need to demonstrate sufficient market value and 
liquidity of the securities. The Commission believes that these 
standards should help to ensure that a sufficient market, with adequate 
depth

[[Page 27600]]

and liquidity, would exist for listed SPAC securities.
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    \24\ This amount is net of amounts disbursed to management for 
working capital purposes and excludes the amount of any deferred 
underwriting discount held in trust.
    \25\ See 17 CFR 230.419. Rule 419 applies to blank check 
companies issuing penny stock as defined under Rule 3a51-1(a)(2) of 
the Act. See 17 CFR 240.3a51-1(a)(2). Rule 419 is not applicable to 
securities traded on the NYSE.
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    Further, the proposed initial listing standards require additional 
protections for public shareholders. The Commission believes that these 
protections, such as requiring a majority of public shareholders to 
approve a Business Combination, the right of public shareholders voting 
against a Business Combination to exercise Conversion Rights to redeem 
their investment, a prohibition on the consummation of a Business 
Combination if a certain percentage of public shares are voted against 
a Business Combination, and the right of shareholders to receive 
liquidation rights if no Business Combination is consummated within a 
specified period of time not to exceed three years, would help to 
ensure that public shareholders approve management's decision with 
respect to a Business Combination, and have remedies if they disagree.
    Moreover, the proposed initial listing standards impose 
requirements on management of the SPAC. First, management of a SPAC 
would have to consummate a Business Combination within three years or 
less, or else investors would be entitled to liquidation rights, and 
NYSE would delist the securities of the SPAC. Second, the founding 
shareholders of the SPAC (including but not limited to management) must 
waive their liquidation rights. Third, NYSE will consider the 
management's experience, record, compensation, equity ownership, and 
restriction on sales, when considering whether to list the 
securities.\26\ The Commission believes that these requirements should 
help to ensure that management of the SPAC, among other things, is 
incented to actively seek out a Business Combination and has requisite 
experience.
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    \26\ Under its rules, NYSE has the discretion to consider the 
listing of the securities of SPACS on a case-by-case basis. The NYSE 
stated in its filing that it will not necessarily list the 
securities of every SPAC that meets the proposed minimum listing 
requirements.
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    The Commission believes that these safeguards should help to ensure 
that SPACs that list securities on NYSE will have taken certain 
additional steps to address investor protection and other matters. In 
this regard, the Commission expects NYSE to thoroughly review potential 
listings of SPAC securities to ensure that its listing standards have 
been met. Based on the foregoing, the Commission finds the proposed 
initial listing standards are consistent with the requirements of the 
Act.

B. Continued Listing Standard of SPACs

    The Commission believes that the Exchange's proposed continued 
listing standards for SPACs are consistent with the requirements of the 
Act and the protection of investors. Due to its nature, a SPAC's 
financial condition will vary depending on where it is in the 
acquisition process. For example, immediately after listing, a SPAC 
would essentially be a shell company with funds to seek an acquisition 
of an operating business. Once the SPAC has announced a proposed 
acquisition, the SPAC would be in the midst of a potential Business 
Combination. Finally, if the Business Combination is consummated, the 
SPAC would begin operating a new business. NYSE is proposing continued 
listing standards for all three situations.
    Prior to a Business Combination, a SPAC would need to maintain 
average aggregate global market capitalization of at least $125,000,000 
or average aggregate global market capitalization of publicly held 
shares of at least $100,000,000, in each case over 30 consecutive 
trading days. NYSE would delist securities of SPACs that fall below 
such requirements immediately and the SPACs could not use the time 
period to cure deficiencies afforded to other operating companies.\27\ 
In addition, the continued listing standards would require SPACs to 
maintain certain distribution criteria and would require a Business 
Combination within three years or less.
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    \27\ See Section 802.02 of the Manual.
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    Immediately prior to consummation of a Business Combination, NYSE 
would consider whether listing of the combined entity would be in the 
best interest of the Exchange and the public interest. Under this 
provision, NYSE would have broad discretion to delist the securities of 
the SPAC prior to the consummation of a Business Combination that would 
not be in the interest of investors or the public. In addition, NYSE 
would consider whether a Business Combination could result in a back 
door listing, and if so, would delist securities of the SPAC. The 
Commission believes that this requirement will help to ensure that 
companies that would not otherwise qualify for original listing could 
not list on NYSE through a backdoor listing in violation of Section 
703.08 of the Manual.
    After consummation of a Business Combination, NYSE would require 
the SPAC to meet the continued listing distribution criteria for common 
stock \28\ and the continued listing Earnings Test numerical 
criteria.\29\ For continued listing, the Earnings Test requires average 
global market capitalization over a consecutive 30 trading-day period 
of at least $75,000,000 and total stockholders' equity of at least 
$75,000,000. After consummation of a Business Combination, SPACs would 
be treated by NYSE as other operating companies.
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    \28\ See Section 802.01A of the Manual.
    \29\ See Section 802.01B of the Manual. See also note 18 supra.
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    Taken as a whole, the Commission believes that the proposed 
continued listing standards are consistent with the requirements of the 
Act. SPACs would be subject to different continued listing standards, 
depending on whether a Business Combination has been consummated, that 
are designed to, among other things, protect investors and promote fair 
and orderly markets. The Commission expects NYSE to actively monitor 
compliance by listed SPACs with these listing standards.

C. Minimum Closing Price Requirement for New Listings

    The Commission notes that the proposed change to require a company 
to have a closing price or an IPO price of at least $4 per share meets 
the criteria from the definition of penny stock contained in Rule 3a51-
1 under the Act.\30\ The Commission finds that this proposal is 
consistent with the requirements of the Act.
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    \30\ See 17 CFR 240.3a51-1(a)(2)(i)(C). The Commission notes 
that the NYSE is adopting a minimum bid price so that securities 
listed on the NYSE meet the exception from the definition of penny 
stock in Rule 3a51-1(a)(2). Securities currently listed on the NYSE 
are included in the ``grandfather'' exception to the definition of 
penny stock in Rule 3a51-1(a)(1) for securities registered or listed 
``on a national securities exchange that has been continuously 
registered as a national securities exchange since April 20, 1992 * 
* * and * * * has maintained quantitative listing standards that are 
substantially similar to or stricter than those listing standards 
that were in place on that exchange on January 8, 2004.'' By 
adopting a listing standard for SPACs, NYSE's listing standards 
would no longer be included in the ``grandfather'' exception. 
Further, the Commission notes that for existing companies, other 
national securities exchanges generally require those companies to 
meet the minimum bid price for certain consecutive trading days 
prior to listing. See, e.g., Nasdaq Rule 4310(c)(2) and NYSE Arca 
Rule 5.2(c)(ii). The Commission still generally believes that for 
companies transferring from another marketplace, to assess 
suitability for trading, it is important and useful to ensure the 
bid test is sustainable based on some period of time prior to 
listing.
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D. Minimum Value of New Listings of Convertible Debt

    The Commission notes that the proposed change to require 
convertible debt issue to have an aggregate market value or principal 
amount of no less than $10,000,000 meets the criteria from the 
definition of penny stock contained

[[Page 27601]]

in Rule 3a51-1 under the Act.\31\ The Commission finds that this 
proposal is consistent with the requirements of the Act.
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    \31\ See 17 CFR 240.3a51-1(a)(2)(i)(F). The Commission notes 
that the NYSE is adopting a minimum value for convertible debt so 
that securities listed on the NYSE meet the exception from the 
definition of penny stock in Rule 3a51-1(a)(2). As noted in footnote 
30, supra, securities listed on the NYSE are included in the 
``grandfather'' exception to the definition of penny stock in Rule 
3a51-1(a)(1) for securities registered or listed ``on a national 
securities exchange that has been continuously registered as a 
national securities exchange since April 20, 1992...and...has 
maintained quantitative listing standards that are substantially 
similar to or stricter than those listing standards that were in 
place on that exchange on January 8, 2004.'' By adopting a listing 
standard for SPACs, NYSE's listing standards would no longer be 
included in the ``grandfather'' exception.
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E. Conclusion

    Based on the above, the Commission believes the proposed rule 
change is reasonable and should provide for the listing of SPACs with 
baseline investor protection and other standards.\32\ The Commission 
believes that, as discussed above, NYSE has developed sufficient 
standards to allow the listing of SPACs on the NYSE, consistent with 
the requirements set forth under the Act and in particular, Section 
6(b)(5).\33\
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    \32\ The Commission notes that under the proposal, the Exchange 
has the discretion to consider initial listing of securities of 
SPACs that otherwise meet NYSE's listing standards, on a case-by-
case basis, and the Exchange has broad discretion to delist the 
securities of SPACs at the time of the Business Combination if the 
Exchange believes it is not in the best interest of the Exchange and 
the public interest.
    \33\ 15 U.S.C. 78s(b)(5). The staff of the Division of Trading 
and Markets would not recommend enforcement action to the Commission 
under Rules 15g-2 through 15g-9 under the Act if broker-dealers 
treat equity securities listed pursuant to the initial listing 
requirements set forth in the Manual as meeting the exclusion from 
the definition of penny stock contained in Rule 3a51-1 under the Act 
pursuant to paragraph (a)(2) thereof.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\34\ that the proposed rule change (SR-NYSE-2008-17) is hereby 
approved.
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    \34\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\35\
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    \35\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E8-10537 Filed 5-12-08; 8:45 am]

BILLING CODE 8010-01-P
