NYSE Cracks Down on Desperate Reverse Stock Split Shenanigans
Published Date: 1/23/2025
Notice
Summary
NYSE American is updating its rules to kick off companies that do too many reverse stock splits—like combining 200 shares into one—within two years or if a reverse split drops their stock below required standards. This means companies must be careful with big stock merges or risk suspension or delisting. The change was approved in early 2025 and aims to keep the market strong and fair for everyone.
Analyzed Economic Effects
4 provisions identified: 1 benefits, 3 costs, 0 mixed.
Delisting for repeated big reverse splits
If a company listed on NYSE American has done one or more reverse stock splits that add up to a cumulative ratio of 200 shares or more to one within the prior two-year period, the Exchange will commence immediate suspension and delisting procedures. This rule change was approved January 16, 2025 and applies to companies meeting the 200-to-1 cumulative ratio over the prior two years.
Delisting when split causes noncompliance
If a listed company effects a reverse stock split and that split causes the company's security to fall below any continued listing requirement in Section 1003 (such as stockholders' equity, market capitalization, or number of shareholders), the Exchange will commence immediate suspension and delisting procedures. The change was approved January 16, 2025 and applies when the reverse split directly results in failure to meet any Section 1003 continued listing standard.
No Section 1009 cure process for triggers
Companies subject to suspension and delisting under these new reverse-split rules are not eligible to follow the Company Guide's Section 1009 procedures. Section 1009 ordinarily notifies a company within 10 business days and provides an opportunity to submit a plan to regain compliance within 18 months; companies hit by these reverse-split triggers cannot use that Section 1009 remedy.
Faster delisting to protect investors
The Exchange and the Commission say the rule change aims to protect investors and the public interest by curtailing use of reverse stock splits to delay delisting and by shortening the time that low-priced or troubled securities can remain listed. The change was approved January 16, 2025 and is intended to improve market integrity and reduce the chance that weak, low-priced stocks remain listed and susceptible to manipulation.
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