
[Federal Register: August 11, 2008 (Volume 73, Number 155)]
[Notices]               
[Page 46670-46672]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11au08-119]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58299; File No. SR-NYSE-2008-68]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change To Enable the Exchange To 
Determine That a Company Meets the Exchange's Market Value Requirements 
by Relying on a Third-Party Valuation of the Company

August 4, 2008.
    Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Exchange Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is 
hereby given that on July 31, 2008, New York Stock Exchange LLC (the 
``NYSE'' or the ``Exchange'') filed with the Securities and Exchange 
Commission the proposed rule changes as described in Items I, II and 
III below, which items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule changes from interested persons.
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    \1\15 U.S.C. 78s(b)(1).
    \2\15 U.S.C. 78a.
    \3\17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend sections 102.01B and 102.01C of the 
Exchange's Listed Company Manual (the ``Manual'') to provide that the 
Exchange will, on a case by case basis, exercise discretion to list a 
company whose stock is not previously registered under the Exchange 
Act, where such a company is listing without a related underwritten 
offering upon effectiveness of a registration statement registering 
only the resale of shares sold by the company in earlier private 
placements. The proposed amendment would permit the Exchange to 
determine that such a company has met its market value requirements by 
relying on a third-party valuation of the company.
    The text of the proposed rule change is available at http://
www.nyse.com, the NYSE, and the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
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. The NYSE 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
    The Exchange proposes to amend sections 102.01B and 102.01C of the 
Manual to provide that the Exchange will, on a case by case basis, 
exercise discretion to list a company whose stock is not previously 
registered under the Exchange Act, where such a company is listing 
without a related underwritten offering upon effectiveness of a 
registration statement registering only the resale of shares sold by 
the company in earlier private placements. The proposed amendment would 
allow the Exchange to determine that such a company has met its market 
value requirements by relying on a third-party valuation of the 
company.
    Section 102.01B of the Manual requires that companies listing on 
the Exchange in connection with their initial public offering (``IPO'') 
or as a result of a spin-off or under the Affiliated Company standard 
must have $60 million in market value of publicly-held shares at the 
time of listing and all other companies must have a market value of 
publicly-held shares of $100 million.\4\ In addition, the Valuation/
Revenue with Cash Flow, Pure Valuation/Revenue, and Affiliated Company 
standards of Section 102.01C require global market capitalization of 
$500 million, $750 million, and $500 million, respectively. Sections 
102.01B and 102.01C provide that, in connection with a company's IPO, 
the Exchange will rely on a written commitment from the underwriter to 
represent the anticipated value of the company's offering in order to 
determine a company's compliance with this listing standard. In the 
case of a spin-off, the company may rely on a letter from the parent 
company's investment banker or other financial adviser.
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    \4\ Shares held by directors, officers, or their immediate 
families and other concentrated holding of 10 percent or more are 
excluded in calculating the number of publicly-held shares.
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    The Exchange has in recent years been approached by a number of 
private companies that would like to list upon the effectiveness of a 
selling shareholder registration statement. These private companies 
typically have sold a significant amount of their common stock to 
qualified institutional buyers in one or more private placements and, 
as a condition to those sales, will have agreed to file a registration 
statement to facilitate the resale of the privately-placed shares. 
These companies may meet all of the financial criteria for listing on 
the Exchange, except that they have not had any prior public market for 
their common stock and they are not contemplating an underwritten 
offering in connection with their selling shareholder registration 
statement. As such, the Exchange cannot rely on trading on any 
predecessor public market to evaluate the company's market value, as 
would be possible with a company transferring from another market. Nor 
is there a public offering whose price would provide the basis for a 
letter of the type provided by underwriters for companies listing in 
conjunction with an IPO.
    The Exchange believes that a company of this sort which otherwise 
meets the Exchange's listing criteria should not be barred from 
listing. As such, the Exchange proposes to list such companies if there 
is available an independent third-party valuation of the company (a 
``Valuation'') and information regarding trading in a private placement 
trading market that, taken together, provide evidence that the company 
meets the relevant market value tests.
    Therefore, the Exchange proposes to amend sections 102.01B and 
102.10C to provide that, in the case of a company whose stock is not 
previously registered under the Exchange Act that is listing upon 
effectiveness of a registration statement without a related 
underwritten offering, the Exchange will have the discretion to 
determine that such company has met the applicable

[[Page 46671]]

market value requirements based on a combination of both (i) a 
Valuation and (ii) the most recent trading price for the company's 
common stock in a trading system for unregistered securities operated 
by a national securities exchange or a registered broker-dealer (a 
``Private Placement Market''). The Exchange will attribute a market 
value to the company equal to the lesser of (i) the value calculable 
based on the Valuation and (ii) the value calculable based on the most 
recent trading price in a Private Placement Market. Any Valuation used 
for this purpose must be provided by an entity that has significant 
experience and demonstrable competence in the provision of such 
valuations. The Valuation must be of a recent date as of the time of 
the approval of the company for listing and the evaluator must have 
considered, among other factors, the annual financial statements 
required to be included in the registration statement, along with 
financial statements for any completed fiscal quarters subsequent to 
the end of the last year of audited financials included in the 
registration statement. The Exchange will consider any market factors 
or factors particular to the listing applicant that would cause concern 
that the value of the company had diminished since the date of the 
Valuation and will continue to monitor the company and the 
appropriateness of relying on the Valuation up to the time of listing. 
In particular, the Exchange will examine the trading price trends for 
the stock in the Private Placement Market over a period of several 
months prior to listing and will only rely on a Private Placement 
Market price if it is consistent with a sustained history over that 
several month period evidencing a market value in excess of the 
applicable standard.
    The Exchange may withdraw its approval of the listing at any time 
prior to the listing date if it believes that the Valuation no longer 
accurately reflects the company's likely market value.
    Companies listed on the basis of a Valuation will be required to 
meet the $100 million test applied to companies transferring from 
another market under section 102.01B, rather than the $60 million IPO 
standard. Companies listing under the Valuation/Revenue with Cash Flow 
standard of section 102.01C(II)(a) of the Manual and the Affiliated 
Company standard of section 102.01C(III) will be required to have a 
global market capitalization of $600 million, rather than the usual 
$500 million requirement. Companies listing under the Pure Valuation/
Revenue standard of section 102.01C(II)(b) will be required to have 
$900 million of global market capitalization, rather than the usual 
$750 million requirement.
    The Exchange acknowledges that a Valuation is only an estimate of 
what a company's true market value will be upon commencement of public 
trading. The Exchange also acknowledges that Private Placement Markets 
generally do not have the depth of liquidity of the public trading 
markets and may therefore be an imperfect guide as to the likely 
performance of a security upon listing. However, the Exchange believes 
that the trading price in a Private Placement Market will provide 
evidence as to the reliability of a Valuation and that, by assuming a 
market value equal to the lesser of the Valuation and a value based on 
the most recent Private Placement Market trading, the Exchange will be 
using a conservative estimation of a company's market value. 
Additionally, by applying the $100 million transfer market value 
requirement rather than the $60 million IPO requirement of Section 
102.01B, along with imposing market value requirements under section 
102.01C that are 20% higher than the normal standards, the Exchange 
believes that it can have sufficient comfort that companies listed 
pursuant to this proposed procedure will evidence appropriate levels of 
market value immediately upon the commencement of public market 
trading. Furthermore, Exchange staff will consider each Valuation with 
care and, giving due consideration to the reputation and experience of 
the third party provider of the Valuation, make an individualized 
determination as to whether it is appropriate to utilize the Exchange's 
discretion to list a company on the basis of this proposed procedure. 
In making that determination, Exchange staff will consider the 
appropriateness of relying on Private Placement Market trading in light 
of the volume and degree of price volatility of such trading. As with 
all other listing applicants, the Exchange reserves the right to deny 
listing to any company seeking to utilize the provisions of this 
proposed rule amendment if the Exchange determines that the listing of 
any such company is not in the interests of the Exchange or the public 
interest.
    Any company listing in reliance upon this proposed amendment will 
be required to meet the IPO distribution requirements of section 
102.01A, i.e., 400 beneficial holders of round lots of 100 shares and 
1,100,000 publicly held shares. The Exchange will rely upon information 
provided by the company's transfer agent in determining whether the 
company meets the holders requirement. The Exchange will be able to 
determine compliance with the 1,100,000 publicly held shares 
requirement by reviewing the disclosure in the company's registration 
statement.
2. Statutory Basis
    The basis under the Exchange Act for this proposed rule change is 
the requirement under section 6(b)(5) \5\ that an Exchange have rules 
that are designed 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 and, in general, to protect 
investors and the public interest. In particular, the Exchange believes 
that the safeguards it has included in its proposed amendment are 
sufficient to ensure that companies that are listed pursuant to the 
proposed Valuation procedure will evidence their compliance with the 
applicable market value requirements immediately after commencement of 
listed trading, thereby protecting investors by ensuring a liquid 
market in such companies' stocks.
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    \5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purpose of the Exchange Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date 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 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

[[Page 46672]]

arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Exchange 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 rule-comments@sec.gov. Please include 
File Number SR-NYSE-2008-68 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2008-68. 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 inspection and copying 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 the 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-NYSE-2008-68 and should be submitted on 
or before September 2, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
 [FR Doc. E8-18369 Filed 8-8-08; 8:45 am]

BILLING CODE 8010-01-P
