Corporate Finance Advisory Bulletin
NASDAQ announces new Global Select Market for listing of its largest companies
Published by DWT's Corporate Finance Group
[Feb. 2006]
On February 15, 2006, the Nasdaq Stock Market, Inc. (Nasdaq) announced its move to expand its company listing tiers from two to three, with the addition of the new Nasdaq Global Select Market. In so doing, the Nasdaq underscored its intention to compete directly with the NYSE for listings of “blue chip” companies, setting what is currently the highest financial and liquidity listing standards. This new structure is subject to SEC approval, which Nasdaq indicated it expects by July 1, 2006.
Additionally, Nasdaq announced that it planned to rename the existing Nasdaq National Market to the Nasdaq Global Market and the Nasdaq Small Cap Market to the Nasdaq Capital Market. No changes in listing requirements are anticipated for these listing tiers.
Eligibility for Nasdaq Global Select Market
Prior to July 1, 2006, the Nasdaq’s listing qualifications department will notify currently listed companies if they qualify for listing on the Global Select Market. Companies listed on the Global Select Market will be required to meet Nasdaq’s existing corporate governance standards. Nasdaq estimates that over 1,000 listed companies currently qualify for the Global Select Market (approximately one-third of its existing listings). The Nasdaq announced that companies in the Nasdaq-100 Index will automatically be transferred to the Global Select Market. Listed companies not in the Nasdaq-100 Index, plus newly-listed companies with a minimum $5 bid price, will qualify based upon the following financial tests and trading liquidity general criteria:
Liquidity and Trading Criteria
- At least 2,200 shareholders, or 12-month average trading volume of at least 1.1 million shares with at least 550 shareholders; and
- Public float of at least 1.25 million shares; and
- Market value of publicly held shares of at least $110 million ($100 million if total shareholders’ equity exceeds $110 million).
Plus, satisfaction of one of the following financial tests:
Earnings
- Three-year aggregate pre-tax earnings of at least $11 million; and
- At least $2.2 million in pre-tax earnings in each of the last two years; and
- Positive pre-tax earnings in each of the last three years.
Cash Flow
- Three-year aggregate cash flow of at least $27.5 million; and
- Positive cash flow in each of the last three years; and
- $550 million or more average 12-month market capitalization; and
- $110 million or more in total revenue.
Market Capitalization
- $850 million or more average market capitalization; and
- $90 million or more in total revenue.
Additional Indexes
The Nasdaq expects to create new indexes for the Nasdaq Global Select Market and the Nasdaq Global Market tiers. An index currently exists for the Nasdaq Capital Market, and Nasdaq will continue to calculate and disseminate the Nasdaq Composite Index.
A copy of Nasdaq’s press release and additional details regarding the Nasdaq Global Select Market are available at Nasdaq.com.
If you have any questions regarding how these new rules may affect your company, or with listing eligibility or corporate governance questions generally, please feel free to contact any of the Davis Wright Tremaine LLP corporate finance attorneys, including:
This Corporate Finance Law Advisory is a publication of the Business Transactions/Corporate Finance Group of Davis Wright Tremaine LLP. Our purpose in publishing this Advisory is to inform our clients and friends of developments in business, corporate finance and securities laws. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations.
Copyright © 2006, Davis Wright Tremaine LLP.
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