NYSE Tightens Rules to Curb Reverse Split Shenanigans
Published Date: 1/22/2025
Notice
Summary
The New York Stock Exchange is tightening rules on reverse stock splits to stop companies from using them to dodge price requirements unfairly. If a company’s stock price falls too low, it can’t just do a reverse split to get a free pass or risk falling below listing standards. These changes kick in quickly and aim to keep the market fair and square for everyone involved.
Analyzed Economic Effects
2 provisions identified: 0 benefits, 2 costs, 0 mixed.
No Cure Period After Recent Reverse Split
If your company is listed on the NYSE and its average closing price is under $1.00 over a consecutive 30 trading-day period, the company normally has a six-month cure period to regain compliance. Under the new rule, a company that (i) effected a reverse stock split in the prior one-year period, or (ii) effected one or more reverse stock splits over the prior two-year period with a cumulative ratio of 200 shares or more to one, will not be eligible for any compliance period and the Exchange will immediately commence suspension and delisting procedures under Section 804.00.
Reverse Splits That Trigger Delisting Prohibited
A listed company may not effectuate a reverse stock split if doing so would cause the company's security to fall below the Exchange's continued listing Distribution Criteria in Section 802.01A. If a company effects such a reverse split nonetheless, it will not be eligible to follow Sections 802.02 or 802.03 procedures and the Exchange will immediately commence suspension and delisting procedures under Section 804.00.
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