[Federal Register Volume 85, Number 185 (Wednesday, September 23, 2020)]
[Notices]
[Pages 59845-59847]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-20935]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89915; File No. SR-NASDAQ-2020-044]


Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Order 
Granting Approval of Proposed Rule Change To Adopt Listing Rule IM-
5900-8 To Offer a Complimentary Global Targeting Tool to Acquisition 
Companies Listed Pursuant to Nasdaq IM-5101-2 That Have Publicly 
Announced Entering Into a Binding Agreement for a Business Combination

September 17, 2020.

I. Introduction

    On July 15, 2020, The Nasdaq Stock Market LLC (``Nasdaq'' 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 offer a complimentary global targeting tool to 
an acquisition company that has publicly announced entering into a 
binding agreement for a business combination. The proposed rule change 
was published in the Federal Register on August 3, 2020.\2\ The 
Commission received no comments on the proposal. This order grants 
approval of the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ See Securities Exchange Act Release No. 89413 (July 28, 
2020), 85 FR 46759 (``Notice'').
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II. Description of the Proposal

    Generally, Nasdaq does 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 (``IPO'') 
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 certain additional conditions described in 
Nasdaq Rule IM-5101-2 (Listing of Companies Whose Business Plan is to 
Complete One or More Acquisitions). Rule IM-5101-2 requires, among 
other things, that at least 90% of the gross proceeds from the IPO and 
any concurrent sale by the company of equity securities must be 
deposited in a ``deposit account,'' as that term is defined in the 
rule, and that the company complete within 36 months, or a shorter 
period identified by the company, one or more business combinations 
having an aggregate fair market value of at least 80% of the value of 
the deposit account (excluding any deferred underwriters fees and taxes 
payable on the income earned on the deposit account) at the time of the 
agreement to enter into the initial combination.\3\
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    \3\ See Rule IM-5101-2(a) and (b). Nasdaq IM-5101-2 also 
requires that following each business combination, the combined 
company must meet the requirements for initial listing. See infra 
note 12. 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 in the IM-5101-2, Nasdaq will issue a 
Staff Delisting Determination under Nasdaq Rule 5810 to delist the 
company's securities. See Rule IM-5101-2(d).
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    The Exchange proposes to adopt Nasdaq IM 5900-8, to allow Nasdaq, 
through its affiliate Nasdaq Corporate Solutions, LLC, to offer a 
company listed under IM-5101-2 (``Acquisition Company'') a 
complimentary global

[[Page 59846]]

targeting tool following the public announcement that the company 
entered into a binding agreement for the business combination intended 
to satisfy the conditions in IM-5101-2(b) until 60 days following the 
completion of the business combination or such time that the 
Acquisition Company publicly announces that such agreement is 
terminated.\4\
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    \4\ See proposed IM-5900-8. As set forth in Nasdaq IM-5900-7 
(Services Offered to Certain Newly Listing Companies), the Exchange 
currently offers certain newly listing companies complimentary 
services to help them satisfy their obligations as public companies 
related to governance and communications, and to provide 
intelligence about their securities. These services are offered to 
companies listing on the Global or Global Select Market, based on 
market capitalization, in connection with their IPO in the United 
States, including American Depository Receipts (other than a company 
listed under IM-5101-2); upon emerging from bankruptcy; in 
connection with a spin-off or carve-out from another company; in 
connection with a Direct Listing as defined in IM-5315-1 (including 
the listing of American Depository Receipts); or in conjunction with 
a business combination that satisfies the conditions in IM-5101-2(b) 
(``Eligible New Listings''). These complimentary services are also 
offered, based on market capitalization, to companies (other than a 
company listed under IM-5101-2) switching their listing from the New 
York Stock Exchange to the Global or Global Select Markets 
(``Eligible Switches''). Nasdaq does not currently offer 
complimentary services to companies listing on the Nasdaq Capital 
Market or to Acquisition Companies listing on any market tier. See 
Nasdaq IM-5900-7. The Exchange stated that, in certain 
circumstances, under the proposal an Acquisition Company may be 
eligible to receive services under both IM-5900-7 and proposed IM-
5900-8 for a short period of time following the completion of a 
business combination pursuant to IM-5101-2.
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    Proposed Nasdaq IM-5900-8 states that, through this global 
targeting tool, investor targeting specialists will help focus the 
Acquisition Company's investor relations efforts on appropriate 
investors, tailor messaging to their interests and measure the 
company's impact on their holdings. The analyst team will help develop 
a detailed plan aligning the targeting efforts with the company's long-
term ownership strategy. Such analysis will include addressable risks 
and opportunities by region and investor type, and recommendations for 
where to focus time. According to the Exchange, this service has a 
retail value of approximately $44,000 per year.\5\
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    \5\ See proposed IM-5900-8.
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III. Discussion and Commission's Findings

    The Commission has carefully reviewed the proposed rule change and 
finds that it is consistent with the requirements of Section 6 of the 
Act.\6\ Specifically, the Commission believes it is consistent with the 
provisions of Sections 6(b)(4) and (5) of the Act,\7\ in particular, in 
that it is designed to provide for the equitable allocation of 
reasonable dues, fees, and other charges among Exchange members, 
issuers, and other persons using the Exchange's facilities, and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers. Moreover, the Commission believes that the 
proposed rule change is consistent with Section 6(b)(8) of the Act \8\ 
in that it does not impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act.
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    \6\ 15 U.S.C. 78f. In approving this proposed rule change, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f(b)(4) and (5).
    \8\ 15 U.S.C. 78f(b)(8).
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    The Commission believes that it is consistent with the Act for the 
Exchange to offer a complimentary global targeting tool to all 
Acquisition Companies \9\ following the public announcement of a 
binding agreement to enter into a business combination intended to 
satisfy the conditions in Nasdaq IM-5101-2(b) until 60 days following 
the completion of the business combination or such time that the 
Acquisition Company publicly announces that such agreement is 
terminated. As stated in its proposal, the Exchange has observed that 
once an Acquisition Company publicly announces a business combination 
with an operating company, the Acquisition Company needs to identify 
and target investors appropriate for the new business and specifically 
target investors who are interested in investing in the acquired 
business.\10\ The Exchange stated that such investor targeting may help 
the Acquisition Company convey the long-term vision of the acquired 
business to investors and diminish potential redemptions at the time of 
the business combination with the operating company.\11\ In addition, 
the Exchange believes that such diminished redemptions may help 
Acquisition Companies remain in compliance with other listing 
requirements, including the shareholder requirement for continued 
listing.\12\ The Exchange further stated that offering the tool for 60 
days following the completion of the business combination will allow 
for a smooth transition to the traditional operating company model and 
avoid disruption of the service during the completion of the business 
combination transaction.\13\
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    \9\ This would include Acquisition Companies listed on the 
Nasdaq Capital, Global, and Global Select Markets. Nasdaq does not 
currently offer complimentary services under IM-5900-7 to companies 
listing on the Nasdaq Capital Market so this rule proposal will be 
the first time the Exchange provides the same service on all three 
listing tiers. See supra note 4.
    \10\ See Notice, supra note 2, at 46760.
    \11\ See id. The Acquisition Company's shareholders have the 
right to redeem their shares for a pro rata share of that trust in 
conjunction with the business combination. See IM-5101-2(d) and (e).
    \12\ See Notice, supra note 2, at 46761. Listing Rule 5450(a)(2) 
requires at least 400 Total Holders for continued listing on the 
Nasdaq Global Market. Listing Rule 5550(a)(3) requires at least 300 
Public Holders for continued listing on the Nasdaq Capital Market. 
The Commission notes, however, that these continued listing 
requirements only apply during the continued listing of the 
Acquisition Company prior to any business combination. Nasdaq IM-
5101-2 requires that, at the time of a business combination, the 
combined company would need to meet all applicable initial listing 
requirements. See supra note 3. For initial listing, among other 
requirements, Listing Rule 5405(a)(3) requires at least 400 Round 
Lot Holders on Nasdaq Global Market and Listing Rule 5505(a)(3) 
requires at least 300 Round Lot Holders on Nasdaq Capital Market.
    \13\ See Notice, supra note 2, at 46761. The Exchange stated 
that Acquisition Companies do not have operating businesses and, 
therefore, do not generally need shareholder communication services, 
market analytic tools or market advisory tools. As a result, these 
companies do not receive complimentary services under Nasdaq IM-
5900-7, but would be eligible to receive services under IM-5900-7 
when listing on the Nasdaq Global or Global Select Market in 
conjunction with a business combination that satisfies the 
conditions in IM-5101-2(b). See id. at 46760. See also IM-5900-7. 
While the Exchange noted that a company may be eligible to receive 
services under both IM-5900-7 and proposed IM-5900-8 for a short 
period of time following the completion of a business combination, 
the Commission notes that such eligibility would be restricted to 
the global targeting tool and would be limited to no more than 60 
days. See supra note 4.
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    As noted in the order approving Nasdaq IM-5900-7, Section 6(b)(5) 
of the Act does not require that all issuers be treated the same; 
rather, the Act requires that the rules of an Exchange not unfairly 
discriminate between issuers.\14\ The Commission believes that the 
Exchange has reasonably justified treating an Acquisition Company that 
has publicly announced that it has entered into a binding agreement to 
enter into a business combination differently than other companies, 
including Acquisition Companies that have not yet announced that they 
have entered into a business combination. As discussed above, 
Acquisition Companies have an increased need to focus on identifying 
and communicating with shareholders and prospective investors following 
the public announcement of entering into a business combination. In 
addition, the Exchange stated that at this time in an Acquisition 
Company's lifecycle, the company is transitioning to the traditional 
operating company model

[[Page 59847]]

and the complimentary global targeting tool will help ease this 
transition.\15\
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    \14\ 15 U.S.C. 78f(b)(5); see also Securities Exchange Act 
Release No. 65963 (December 15, 2011), 76 FR 79262 (December 21, 
2011) (approving NASDAQ-2011-122) (``2011 Approval Order'').
    \15\ See Notice, supra note 2, at 46761.
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    The Commission also believes that describing in the Exchange's 
rules the products and services available to listed companies and their 
associated values adds greater transparency to the Exchange's rules and 
to the fees applicable to such companies and will ensure that 
individual listed companies, including Acquisition Companies, are not 
given specially negotiated packages of products or services to list, or 
remain listed, that would raise unfair discrimination issues under the 
Act.\16\ The Commission has previously found that the package of 
complimentary services offered to Eligible New Listings and Eligible 
Switches, which includes the global targeting tool, is equitably 
allocated among issuers consistent with Section 6(b)(4) of the Act.\17\ 
Based on the foregoing, the Commission believes that the Exchange has 
provided a sufficient basis for offering a complimentary global 
targeting tool to Acquisition Companies that have announced that they 
have entered into a binding agreement to enter into a business 
combination until 60 days following the completion of the business 
combination (or such time that the Acquisition Company publicly 
announces that such agreement is terminated), and that this change does 
not unfairly discriminate among issuers and is consistent with the Act.
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    \16\ See Exchange Act Release No. 79366, 81 FR 85663 at 85665 
(approving SR-NASDAQ-2016-106) (``2016 Approval Order'') (citing 
Securities Exchange Act Release No. 65127 (August 12, 2011), 76 FR 
51449, 51452 (August 18, 2011) (approving NYSE-2011-20)). The 
Commission notes that the Exchange also stated that no other company 
will be required to pay higher fees as a result of the proposal and 
that providing the complimentary global targeting tool will have no 
impact on the resources available for its regulatory programs. See 
Notice, supra note 2, at 46760.
    \17\ See 2016 Approval Order, supra note 16, at 85665.
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    The Commission also believes that the Exchange is responding to 
competitive pressures in the market for listings in making this 
proposal. The Exchange stated in its proposal that it faces competition 
in the market for listing services and the Commission understands that 
the Exchange competes, in part, by offering complimentary services to 
companies.\18\ The Exchange further stated it believes the offering of 
the complimentary global targeting tool will provide an incentive to 
Acquisition Companies to list on Nasdaq.\19\ Accordingly, the 
Commission believes that the proposed rule reflects the current 
competitive environment for exchange listings among national securities 
exchanges, and is appropriate and consistent with Section 6(b)(8) of 
the Act.\20\
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    \18\ See Notice, supra note 2, at 46761. The Commission notes 
that the complimentary services under the proposal will be provided 
by Nasdaq Global Solutions, LLC, an affiliate of Nasdaq. The 
Commission has previously stated that providing complimentary 
services to its listed companies through an affiliate as opposed to 
a third party vendor is among the different ways Nasdaq competes for 
listings and provides services to listed companies and that this 
reflects the competitive environment. See 2011 Approval Order, supra 
note 14, at 79267. The Exchange also noted that other providers 
could compete by offering similar services to Acquisition Companies. 
See Notice, supra note 2, at 46761.
    \19\ See Notice, supra note 2, at 46760.
    \20\ 15 U.S.C. 78f(b)(8).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\21\ that the proposed rule change (SR-NASDAQ-2020-044) be, and it 
hereby is, approved.
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    \21\ 15 U.S.C. 78s(b)(2).
    \22\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-20935 Filed 9-22-20; 8:45 am]
BILLING CODE 8011-01-P


