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Frequently Asked Questions
  Does a sale of securities in a transaction (other than a public offering) at a discount to the market value to officers, directors, employees, or consultants require shareholder approval under Listing Rule 5635(c)?  
Identification Number 275
Yes. The issuance of common stock (or equivalents) or securities convertible into or exercisable for common stock to officers, directors, employees, or consultants at a price less than the market value of the stock is considered a form of "equity compensation" and requires shareholder approval unless the issuance is part of a public offering (as described in IM-5635-3). For this purpose, market value is the closing bid price immediately preceding the time the company enters into a binding agreement to issue the securities.
 
Issuances to an entity controlled by an officer, director, employee, or consultant of the listed company may also be considered equity compensation under certain circumstances, such as where the issuance would be accounted for under Generally Accepted Accounting Principles as equity compensation or result in the disclosure of compensation under the applicable provisions of Regulation S-K.
 
Note that this provision also applies to limited partnerships, which are required by Rule 5615(a)(4)(H) to obtain the same approval for equity compensation as would be required under Rule 5635(c) and IM-5635-1.
 
A company considering an issuance to an entity controlled by an officer, director, employee, or consultant is encouraged to contact its Listing Qualifications analyst by phone at +1 301 978 8008 to discuss the transaction prior to entering into a definitive agreement.
 
Publication Date*: 6/18/2013 Identification Number: 275 Mailto Link
Frequently Asked Questions
  What is required for a company to rely on the exception from the shareholder approval requirement for an equity compensation inducement award?    
Identification Number 253
In order to rely on the exception from the shareholder approval requirement for an equity compensation awarded as an inducement material to the individual's entering into employment with the company, the issuance must be approved by the company's compensation committee or a majority of the company's independent directors. In addition, the company must issue a press release promptly following the grant, which discloses the material terms of the award.
 
Publication Date*: 7/31/2012 Identification Number: 253 Mailto Link
Frequently Asked Questions
  How is the percentage of shares of common stock to be issued in a transaction calculated?    
Identification Number 182
The percentage of shares of common stock to be issued in a transaction is calculated using the following formula:
 
Maximum Potential Issuance of Shares of Common Stock
Pre-transaction Issued and Outstanding Shares of Common Stock
 
To correctly calculate the percentage of shares to be issued, the numerator of this equation must contain all securities initially issued or potentially issuable or potentially exercisable or convertible into shares or common stock as a result of the transaction (e.g., earn-out clauses, penalty provisions, equity compensation awards assumed or in assumed plans, etc.).
 
To correctly determine the denominator, the company should use only issued and outstanding shares. If the company has multiple classes of common stock, all shares should be added together. However, the denominator should not assume the conversion or exercise of any options, warrants or other convertible securities.
 
Publication Date*: 7/31/2012 Identification Number: 182 Mailto Link
Frequently Asked Questions
  What factors does Nasdaq consider when determining whether to aggregate the shares issued in separate transactions for purposes of determining whether the threshold for shareholder approval has been triggered?    
Identification Number 283
In deciding whether to aggregate transactions to determine whether shareholder approval is required, Nasdaq will consider whether the company is engaging in a stand-alone transaction or a series of issuances.

In general, Nasdaq will consider the following factors in making this determination:
    • Timing of the issuances - Timing alone is not necessarily a determining factor, and there is no definitive time period as to whether transactions are aggregated. Generally, if there are no other linkage factors present, transactions more than six months apart would not be aggregated;
    • Initiation of the subsequent transaction or transactions - At the time of the first transaction, was the company already planning the subsequent transaction? Did it already expect that it would have to raise additional capital?;
    • Commonality of investors - Transactions with common investors are more likely to be aggregated. In addition, the time period over which transactions would be aggregated, may be extended when there are common investors;
    • Existence of any contingencies between the issuances or transactions - Are the sales contingent upon one another? For example, a company may be required to obtain an equity line of credit before completing a discounted private placement;
    • Commonality as to the use of the proceeds/Same plan of financing - Transactions may be aggregated if they are used for the same purpose or plan of financing; and
    • Timing of the board of directors approval.
When transactions are aggregated, the calculation total shares outstanding or total voting power outstanding is made based on the shares and votes outstanding prior to the closing of the first issuance.
 
Publication Date*: 7/31/2012 Identification Number: 283 Mailto Link
Frequently Asked Questions
  Which application type should I select and, why does this matter?  
Identification Number 43
You should choose the application type that best describes your Company as this drives the questions that will be asked of you throughout the application process. A description of the different application types is as follows:
 
Company Conducting an Initial Public Offering or Distribution Spinoff. Choose this option if your Company does not already file periodic and annual reports with the Securities and Exchange Commission and is not listed on another market. Alternatively, you should choose this option if you are a foreign Company performing an initial public offering of ADRs in the United States.
 
Seasoned Company, Company Switching from Another Market. Choose this option if your Company is already trading on another U.S. exchange or if you are traded on the OTCBB or pink sheets. If you are trading on a foreign exchange, please choose Other.
 
Company Seeking Dual Listing. Choose this option if your Company is already listed on the New York Stock Exchange and would like to simultaneously list on Nasdaq.
 
Company Transferring from the Capital Market to the Global or Global Select Market. Choose this option if your Company is already listed on Nasdaq on the Capital Market and would like to switch to the Global or Global Select Market.
 
Company Transferring from the Global or Global Select Market to the Capital Market. Choose this option if your Company is already listed on Nasdaq on the Global or Global Select Market and would like to switch to the Capital Market.
 
Company Transferring from the Global Market to Global Select Market. Choose this option if your Company is already listed on Nasdaq on the Global Market and would like to switch to the Global Select Market.
 
Company Conducting a Change of Control Combination OR for SPACs completing a business combination following which the combined Company is required to meet the requirements for initial listing. Choose this option if your Company is merging with a Company that is already listed on Nasdaq.
 
NOTE: Listing applicants resulting from business combinations with SPACs wherein the Nasdaq-listed entity is acquired by a new SEC registrant are considered to be new listings. Such entities should NOT complete this application, but instead complete the Listing Application – For Seasoned Companies.
 
Company Seeking to list a New Class of Securities. Choose this option if your Company is already listed on Nasdaq and would like to list an additional class of securities. Please do not use this type of application if you are seeking to list structured products (e.g., ETFs, ETNs, Trust Preferreds).
 
Company Seeking to List an Exchange Traded Fund or Other Structured Product. Choose this option if you would like to list any of the following:
  • Exchange-Traded Funds
  • Exchange-Traded Notes
  • Managed Fund Shares (Active ETFs)
  • Portfolio Depositary Receipts
  • Selected Equity-Linked Debt Securities (SEEDS)
  • Trust Issued Receipts
  • Index-Linked Exchangeable Notes
  • Equity Gold Shares
  • Trust Certificates
  • Commodity-Based Trust Shares
  • Currency Trust Shares
  • Commodity Index Trust Shares
  • Commodity Futures Trust Shares
  • Partnership Units
  • Trust Units
  • Managed Trust Securities
  • Currency Warrants
  • Index Warrants

Please contact Nasdaq Listing Qualifications at +1 301 978 8008 with questions about the listing of products not listed above.

 
Publication Date*: 7/31/2012 Identification Number: 43 Mailto Link
Frequently Asked Questions
  Must a company provide notice to Nasdaq about its shareholder meeting?
Identification Number 85
A company that files its proxy statement via EDGAR in connection with an annual shareholder meeting does not have to provide any additional notice to Nasdaq about its annual meeting. A company that does not file a proxy via EDGAR must send its proxy statement or other shareholder notice to Listing Qualifications via email at continuedlisting@nasdaq.com no later than when it is mailed to shareholders.  
 
Publication Date*: 7/31/2012 Identification Number: 85 Mailto Link
Frequently Asked Questions
  Do Nasdaq’s listing rules limit or restrict the issuance of warrants that provide for cashless exercise and/or exchanges of the warrant for stock?
Identification Number 1143
Listed companies may issue warrants that allow the holder, under certain circumstances, to exercise or exchange them for stock in a cashless transaction.   Nasdaq’s Listing Rules do not explicitly prohibit or restrict the issuance of warrants with this kind of cashless exercise/exchange provision.   However, these warrants may be Future Priced Securities, as defined in Rule IM-5635-4.  Typically,  a warrant that is a Future Priced Security would allow the warrant holder to surrender an “out-of-the-money” warrant in exchange for a fixed dollar value of shares (usually calculated through a formula) with the actual number of shares determined based on the share price at the time of surrender.  This would result in the issuance of an increasing number of shares as the share price declines.   Depending on the circumstances, Nasdaq may determine that the issuance of securities with this provision raises public interest concerns under the Rule 5100 Series.

Warrants may be structured to limit or mitigate these concerns through features that may limit the dilutive effect of the transaction. Such features may provide incentives to the investor to hold the security for a longer time period or limit the number of shares into which the Future Priced Security may be converted.  
When reviewing transactions that include these types of securities for compliance with the Listing Rules, including whether they raise public interest concerns, Nasdaq generally assumes that conversion of the warrants will result in the maximum possible dilution over the shortest period of time. In addition, in determining whether the issuance of a warrant that is a Future Priced Security raises public interest concerns, Nasdaq staff will consider among other things: (1) the business purpose of the transaction; (2) the amount to be raised in the transaction relative to the Company's existing capital structure; (3) the dilutive effect of the transaction on the existing shareholders; (4) the risk undertaken by the Future Priced Security investor(s); (5) the relationship between the investor(s) and the Company; (6) whether the transaction was preceded by other similar transactions;  (7) whether the transaction is consistent with the just and equitable principles of trade; and (8) whether the warrant includes features to limit the potential dilutive effect of its conversion or exercise, including floors on the conversion or exercise price.  Nasdaq encourages any company considering issuing a warrant that provides for cashless exercise and/or exchanges of the warrant for stock to review IM-5635-4 and to consult with the Listing Qualifications Department at (301) 978-8008.
Publication Date*: 2/11/2016 Identification Number: 1143 Mailto Link
Frequently Asked Questions
  What details must a company include in the press release disclosing its reliance upon the shareholder approval exception for an inducement grant?    
Identification Number 255
A company is required to disclose the material terms of the inducement grant, including the recipient(s) of the grant and the number of shares involved. If the disclosure relates to an award to executive officers, or the award was individually negotiated, then the disclosure must include the identity of the recipient.  
 
Publication Date*: 7/31/2012 Identification Number: 255 Mailto Link
Frequently Asked Questions
  For purposes of Nasdaq's shareholder approval rules, what is "market value"?    
Identification Number 271
As set forth in Listing Rule 5005(a)(22), "market value" means the consolidated closing bid price multiplied by the measure to be valued. For purposes of the shareholder approval requirements, "market value" is the consolidated closing bid price per share immediately preceding the entering into of the binding agreement to issue the securities. If the transaction is entered into during market hours, before the close of the regular session at 4 PM Eastern Time, the previous trading day's consolidated closing bid price is used. If the transaction is entered into after the close of the regular session, then that day's consolidated closing bid price is used. Please note that the Nasdaq Official Closing Price may differ from the consolidated closing bid price and, therefore, should not be used to determine market value for this purpose. In addition, an average price over any period of time is not acceptable.
 
Publication Date*: 7/31/2012 Identification Number: 271 Mailto Link
Frequently Asked Questions
  Are there any exceptions to Nasdaq's shareholder approval requirement for equity compensation?    
Identification Number 238
Yes. Pursuant to Listing Rule 5635(c), shareholder approval is not required for:
    • Warrants or rights issued to all security holders on equal terms;
    • Stock purchase plans available to all security holders on equal terms (e.g., a dividend reinvestment plan);
    • Tax qualified, non-discriminatory employee benefit plans or parallel nonqualified plans which are regulated under the Internal Revenue Code and Treasury Department regulations, provided such plans are approved by the issuer's independent compensation committee or a majority of the issuer's independent directors. A similar plan for the company's non-U.S. employees, which provides features necessary to comply with applicable non-U.S. tax laws, is also exempt from the shareholder approval requirement;
    • Plans that provide a convenient way to purchase shares on the open market or from the issuer at fair market value;
    • Certain plans relating to mergers and acquisitions; or
    • Inducement grants.  
 
Publication Date*: 7/31/2012 Identification Number: 238 Mailto Link
material_search_footer*The Publication Date reflects the date of first inclusion in the Reference Library, which was launched on July 31, 2012, or a subsequent update to the material. Material may have been previously available on a different Nasdaq web site.
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