
[Federal Register Volume 81, Number 250 (Thursday, December 29, 2016)]
[Notices]
[Pages 96150-96152]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-31488]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79676; File No. SR-NYSE-2016-72]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change Amending Its Listing Standards 
for Special Purpose Acquisition Companies

December 22, 2016.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on December 8, 2016, New York Stock Exchange LLC (``NYSE'' 
or the ``Exchange'') filed with the Securities and Exchange Commission 
(the ``Commission'') the proposed rule change as described in Items I, 
II, and III below, which Items have been prepared by the self-
regulatory organization. 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\ 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 its listing standards for special 
purpose acquisition companies (``SPACs'') set forth in Section 102.06 
of the NYSE Listed Company Manual (the ``Manual'') to (i) reflect 
changes to the SPAC structure in transactions that have come to market 
in recent years and (ii) adjust the quantitative requirements for 
initial and continued listing. The proposed rule change is available on 
the Exchange's Web site at www.nyse.com, at the principal office of the 
Exchange, and at 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 those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

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

1. Purpose
    The Exchange proposes to amend its listing standards for 
Acquisition Companies (or ``ACs'') set forth in Section 102.06.
    An AC (typically known in the marketplace as a special purpose 
acquisition company or ``SPAC'') is a special purpose company formed 
for the purpose of effecting a merger, capital stock exchange, asset 
acquisition, stock purchase, reorganization or similar business 
combination with one or more operating businesses or assets. The 
securities sold by the AC in its initial public offering are typically 
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. Management generally is granted 
a percentage of the AC's equity and may be required to purchase 
additional shares in a private placement at the time of the AC's IPO.
    The typical AC structure has changed significantly since the NYSE 
adopted its current listing standards. The listing standards of the 
Nasdaq Stock Market and NYSE MKT both permit the listing of ACs with 
this revised structure and the NYSE now proposes to revise Section 
102.06 accordingly.
    Currently, Section 102.06 requires that at least 90% of the 
proceeds raised in the IPO and any concurrent sale of equity securities 
be placed in a trust account. Further, Section 102.06 requires that, 
within 36 months or such shorter time period as specified by the AC, 
the AC complete one or more business combinations having an aggregative 
fair market value of at least 80% of the value of the trust account 
(the ``Business Combination''). Until the AC has completed a business 
combination of at least 80% of the trust account value, the AC must, 
among other things, submit the Business Combination to a shareholder 
vote. Any public shareholders who vote against the Business Combination 
have a right to convert their shares of common stock into a pro rata 
share of the aggregate amount then in the trust account, if the 
business combination is approved and consummated. The AC cannot 
consummate its Business Combination if public shareholders owning in 
excess of a threshold amount (to be set no higher than 40%) of the 
shares of common stock issued in the AC's initial public offering 
exercise their conversion rights in connection with such Business 
Combination.
    Since the adoption of Section 102.06, ACs that went public and did 
not list on an exchange began to adopt a modified structure. In 
response, Nasdaq and NYSE MKT both amended their listing rules to 
accommodate these changes. The Exchange understands that these changes 
were made to address a strategy that had been undertaken by hedge funds 
and other activist investors in relation to a number of ACs. The 
Exchange understands that these investors may have acquired an interest 
in an AC 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 AC's management for a price higher than their 
pro rata share of the trust account. In other cases, the withheld votes 
may have caused the proposed acquisition to fail altogether. The 
Exchange understands the revisions to the AC structure were adopted to 
prevent this sort of ``greenmail.''
    Under the revised structure, an AC would not seek a vote on the 
Business Combination unless otherwise required by law. Instead, the AC 
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 vehicle. This is the 
same outcome available to public shareholders who vote against the 
acquisition pursuant to the Exchange'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 AC's cash through 
the tender offer pursuant to Rule 13e-4 and Regulation 14E under the 
Act. As such, the Exchange believes that the protections provided by 
the existing rule would continue to be available. Accordingly, the 
Exchange proposes to modify Section 102.06 to allow an AC to conduct a 
tender offer for all shares of all shareholders in exchange for a pro 
rata share of the cash held in trust by the AC in compliance with Rule 
13e-4 and Regulation 14E under the Act instead of soliciting a 
shareholder vote.
    In addition, the proposed rule change would require an AC that is 
not subject to the Commission's proxy rules to conduct a tender offer 
for shares in

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exchange for a pro rata share of the cash held in trust by the AC 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 AC seeks a shareholder vote. This change would assure that 
investors, in all cases, get comparable information about the proposed 
transaction.
    The Exchange also proposes to eliminate the requirement that the AC 
cannot consummate its Business Combination if public shareholders 
owning in excess of a threshold amount (to be set no higher than 40%) 
of the shares of common stock issued in the AC's initial public 
offering exercise their conversion rights in connection with such 
Business Combination. The Exchange notes that this limitation does not 
exist under the rules of Nasdaq or NYSE MKT and also that there will be 
disclosure enabling shareholders to include in their decision making 
consideration of the fact that the post-Business Combination entity may 
vary in size depending on how many shares are redeemed for cash. The 
amended rule would permit AC shareholders to make their own informed 
decisions as to whether they want to participate in the Business 
Combination.
    The Exchange also proposes to amend the quantitative requirements 
of Section 102.06. Under the current rule, an AC must have an aggregate 
market value of $250 million and $200 million of market value of 
publicly-held shares \4\ at the time of initial listing. The Exchange 
has observed that most of the ACs that have listed on other markets in 
recent years are significantly smaller than they would need to be to 
meet the NYSE's current quantitative requirements. As such, the 
Exchange proposes to change the aggregate market value and market value 
of publicly-held shares requirements of Section 102.06 to $100 million 
and $80 million, respectively. The Exchange notes that there are a 
number of ACs listed currently on other markets that would have met 
these revised requirements, but not those of the current rule, and that 
there is no evidence that these companies are unfit for exchange 
trading. The Exchange also notes that its revised quantitative 
requirements would remain higher than those of Nasdaq and NYSE MKT.\5\
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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.
    \5\ The Exchange notes that an AC could list on Nasdaq Global 
Market under Nasdaq Marketplace Rule 5405(b)(3) on the basis of a 
market value of listed securities of $75 million and a market value 
of publicly held shares of $20 million. The Exchange's understanding 
is that Nasdaq calculates the market value of listed securities by 
multiplying the total shares outstanding by the public offering 
price per share, which is also how the Exchange calculates aggregate 
market value for purposes of Section 102.06. As such, the comparable 
requirements are clearly lower on Nasdaq Global Market in both 
cases.
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    The Exchange also proposes to adjust the continued listing 
standards for ACs to align them with the proposed revised initial 
listing standards. Currently, the Exchange will initiate suspension and 
delisting procedures of an AC prior to its Business Combination if its 
average aggregate global market capitalization fell below $125 million 
or the average aggregate global market capitalization attributable to 
its publicly-held shares fell below $100 million, in each case over 30 
consecutive trading days. An AC is not eligible to follow the 
compliance plan procedures outlined in Sections 802.02 and 802.03 with 
respect to this criterion, and any such AC is subject to an immediate 
trading suspension and the commencement of immediate delisting 
proceedings. The Exchange proposes to replace this with a provision 
under which a pre-Business Combination AC would be subject to prompt 
initiation of suspension and delisting procedures if its average global 
market capitalization fell below $50 million or its aggregate market 
value of publicly-held shares fell below $40,000,000 over 30 
consecutive trading days. The Exchange believes that this continued 
listing standard is appropriate as it is consistent with the 
requirement applied to operating companies (as described in the next 
paragraph), but without the cure periods provided to operating 
companies. The Exchange would notify the AC if its average aggregate 
global market capitalization fell below $75,000,000 or its aggregate 
market value of publicly-held shares fell below $60,000,000.
    Currently, an AC upon consummation of its Business Combination is 
subject only to the continued listing requirements applicable to 
operating companies (i.e., either its average global market 
capitalization or its stockholders' equity must be at least $50 
million).\6\ In connection with its adjustment of the initial listing 
standards for ACs, the Exchange proposes to adopt a requirement that, 
immediately after consummation of the Business Combination, the post-
Business Combination company must meet the following requirements:
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    \6\ In addition, when a listed AC consummates its Business 
Combination, the Exchange will consider whether the Business 
Combination gives rise to a ``back door listing'' as described in 
Section 703.08(E). If the resulting company would not qualify for 
original listing, the Exchange will promptly initiate suspension and 
delisting of the AC.
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     A price per share of at least $4.00;
     a global market capitalization of at least $150,000,000;
     an aggregate market value of publicly-held shares of at 
least $40,0000,000; and
     the requirements with respect to shareholders and 
publicly-held shares set forth in Section 102.01A for companies listing 
in connection with an initial public offering.\7\
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    \7\ Currently, Section 102.01A requires companies listing in 
connection with their IPO to have a minimum of 400 holders of 100 
shares and 1,100,000 publicly-held shares.
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    When a listed AC consummates its Business Combination, the Exchange 
will require the AC to submit an original listing application which 
must be approved by the Exchange prior to consummation of the Business 
Combination. The Exchange believes that by requiring a post-Business 
Combination AC to meet a significantly enhanced continued listing 
requirement, it would better ensure that only ACs that post-Business 
Combination are clearly suitable for listing on the NYSE will remain 
listed.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\8\ in general, and furthers the 
objectives of Section 6(b)(5) \9\ of the Act, in particular in that it 
is designed 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 
and is not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers. The Exchange believes the proposed rule 
change furthers these goals in that it imposes additional requirements 
on ACs, which are designed to protect investors and the public interest 
and prevent fraudulent and manipulative acts and practices on the part 
of ACs and their promoters.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed revisions to the aggregate 
market value and market value of publicly-held shares requirements are 
consistent with the protection of investors in that a number of ACs 
have listed on other markets that would have

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met the proposed new standards (but not those in the existing rule) and 
there is no evidence that they have proven unfit for exchange trading. 
The Exchange also believes that the proposal to modify Section 102.06 
to allow an AC to conduct a tender offer for all shares of all 
shareholders in exchange for a pro rata share of the cash held in trust 
by the AC in compliance with Rule 13e-4 and Regulation 14E under the 
Act instead of soliciting a shareholder vote protects investors and the 
public interest, as it will help prevent ``greenmail'' strategies where 
professional investors seek to force ACs to give them consideration not 
available to other shareholders as a condition for voting in favor of 
an acquisition.
    The Exchange believes that it is consistent with the protection of 
investors to delete the requirement that a Business Combination not go 
forward if shareholders exceeding a threshold amount exercise their 
conversion rights, as shareholders will be informed in advance of the 
fact that the size of the post-Business Combination entity will vary 
depending on the amount of securities that are converted and they will 
be able to make their own informed decisions as to whether to 
participate in light of that disclosure. The Exchange believes that the 
proposed amendments to the continued listing standards are consistent 
with the protection of investors as the requirements for pre-Business 
Combination ACs would be as high as those applied to operating 
companies and the standard applied at the time of the Business 
Combination would be significantly higher than that applied to other 
continued listings.
    While the proposed amended quantitative requirements for the 
listing of ACs would be lower than those for other listing applicants, 
the Exchange does not believe that this difference is unfairly 
discriminatory. The Exchange believes this to be the case because 
market value-based listing standards are largely adopted to ensure 
adequate trading liquidity and, consequently, efficient market pricing 
of a company's securities. As an investment in an AC prior to its 
Business Combination represents a right to a pro rata share of the AC's 
assets held in trust, AC shares typically have a trading price very 
close to their liquidation value and the liquidity and market 
efficiency concerns relevant to listed operating companies do not arise 
to the same degree. As such, the Exchange does not believe it is 
unfairly discriminatory to apply different market value requirements to 
ACs than to other listing applicants.

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 purposes of the Act. The proposed rule change is 
designed to harmonize the Exchange's rules with changes in the AC 
structure prevalent in the marketplace and embodied in the rules of 
other listing markets. As such, it is intended to promote competition 
for the listing of ACs.

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

    No written comments were solicited or received with respect to the 
proposed rule change.

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 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 email to rule-comments@sec.gov. Please include 
File Number SR-NYSE-2016-72 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSE-2016-72. This file 
number should be included on the subject line if email 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 
10:00 a.m. and 3:00 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-2016-72 and should be 
submitted on or before January 19, 2017.

    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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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016-31488 Filed 12-28-16; 8:45 am]
 BILLING CODE 8011-01-P


