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SEC Approves NASDAQ's BX Venture Market- a New Listing Option for Smaller Companies

Michael R. Littenberg and Jillian B. Goldberg of Schulte Roth & Zabel LLP


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The NASDAQ OMX Group has received approval from the SEC to launch its new listing market, the BX Venture Market. The BX Venture Market is intended to serve as a new listing alternative for early stage and smaller companies that do not qualify for a NASDAQ Capital Market listing, bridging the gap between the over-the-counter markets and NASDAQ's existing listing venues. Companies will be able to list common and preferred stock, ordinary shares and ADRs, trust and limited partnership interests, units, rights and warrants. NASDAQ expects to launch the BX Venture Market during 2012.

Candidate companies for listing on the BX Venture Market include those presently trading on an over-the-counter market, companies that have been or will be delisted by another market for failure to meet that market's quantitative listing standards and smaller, less-liquid companies seeking to expand capital financing opportunities and provide an exit opportunity for initial investors.

To be eligible for a BX Venture Market listing, a company must meet the following quantitative standards:

  • 200,000 publicly held shares;
  • 200 public shareholders, at least 100 of which must be round lot holders for initial listing, and 200 public shareholders for continued listing;
  • A market value of listed securities of at least $2 million for initial listing and $1 million for continued listing;
  • Two market makers; and
  • A minimum initial listing price of $1.00 per share for securities not previously listed on a national securities exchange and $0.25 per share for securities previously listed on a national securities exchange at any time during the three months prior to listing on the BX Venture Market; the listed security must maintain a minimum $0.25 per share bid price for continued listing.

Additionally, companies that have not previously listed on a national securities exchange must have either $1 million in stockholders' equity or $5 million in total assets, a one year operating history and a plan to maintain sufficient working capital for its planned business for at least 12 months after listing. In connection with listing, NASDAQ listings staff will conduct a public interest review of a candidate company's listing application, which will include, among other things, a background check of the company and affiliated individuals and a review of the company's proxy disclosures and other SEC filings.

The BX Venture Market will have comparable, though in many respects less stringent, qualitative listing standards to those of The NASDAQ Stock Market and other national securities exchanges. Among other requirements, the listed class of securities must be registered under Section 12(b) of the Exchange Act, the company must be current in its Exchange Act filings and, subject to phase-in, the company must have an independent audit committee comprised of at least three members and independent directors must make or recommend compensation decisions for executive officers. However, BX Venture Market companies will not be required to have a majority independent board or an independent nominating committee and they will not be subject to the "20% rule," which requires shareholder approval for a private placement issuance equal to 20% or more of the outstanding common stock at a price less than the greater of book and market value. Securities listed on the BX Venture Market will not be exempt from state blue-sky requirements or the SEC's penny stock rules.


Authored by Michael R. Littenberg and Jillian B. Goldberg.

Michael R. Littenberg, +1 212.756.2524; michael.littenberg@srz.com; or through LinkedIn.

Business Equity and debt capital markets, securities law compliance, corporate governance, venture capital and mergers and acquisitions

Experience and Background

Michael R. Littenberg is a partner in the New York office of Schulte Roth & Zabel LLP. He heads the firm's public companies practice.

Michael has over 20 years of experience representing issuers and underwriters in transactions spanning a wide range of equity and debt products, industries and markets. During the course of his career, Michael has represented clients in over 150 underwritten offerings that have raised in excess of $30 billion. In addition to his transactional capital markets work, Michael represents issuers and their boards in ongoing U.S. securities law and securities exchange compliance matters and general corporate matters. He also spends a significant portion of his time advising on public and private mergers and acquisitions, representing issuers and investors in venture capital transactions and advising special committees.

Michael has authored over 75 articles pertaining to U.S. securities law matters and is frequently quoted in the general business and specialty press on securities law issues.

Full Bio

SCHULTE ROTH & ZABEL LLP SECURITIES AND CAPITAL MARKETS PRACTICE

SRZ offers a full-service capital markets practice that provides transactional and ongoing advice through all stages for companies of all sizes. We represent U.S. and non-U.S. issuers, investment banks and investors in connection with U.S. and global capital markets transactions, including SEC registered, Regulation D, Rule 144A and Regulation S offerings. Our expertise spans an extensive range of equity and debt products, including initial public offerings, investment grade and non-investment grade debt, SPACs, BDCs and other permanent capital vehicles, trust preferred securities, preferred stock, equity-linked securities, PIPEs, CMPOs, ATMs and registered direct offerings. In addition to our transactional capital markets practice, we counsel public companies, their boards, board committees, special committees, executive officers and investors in connection with ongoing compliance under the U.S. securities laws, including under Dodd-Frank and Sarbanes-Oxley, and with exchange requirements, as well as on governance and executive compensation matters.

Our public company clients range from well-known large-cap companies to growing micro-cap companies. We have experience in every major industry, including apparel, automotive, aviation, biotechnology, broadcasting, business services, computer hardware, consumer services, defense, energy, entertainment, financial services, food and beverage, government services, information technology, insurance, manufacturing, media, natural resources, real estate, restaurant and hospitality, retailing, shipping and logistics, software, technology and telecommunications.

Schulte Roth & Zabel is actively involved in assisting domestic companies and foreign private issuers in evaluating and listing on the BX Venture Market, as well as other emerging listing venues including the OTCQX. If you have any questions concerning this Alert, please contact Michael Littenberg, the head of the Schulte Roth & Zabel public companies practice, at the phone number or email address indicated below.

Material in this work is for general educational purposes only, and should not be construed as legal advice or legal opinion on any specific facts or circumstances. For legal advice, please consult your personal lawyer or other appropriate professional. Reproduced with permission from Schulte Roth & Zabel LLP. This work reflects the law at the time of writing October 2011.