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Frequently Asked Questions
  Staff Interpretation Letter 2009-13
Identification Number 731
This is in response to your correspondence regarding the applicability of NASDAQ’s shareholder approval requirements of Listing Rules 5635(b) and 5635(d) (the “Rules”) to a proposed issuance of common stock (the “Proposed Offering”).  In addition, you asked whether the Proposed Offering would be aggregated with a prior private placement (the “Prior Offering”) so as to cause the Prior Offering to violate Listing Rule 5635(d).  Relevant to the applicability of the Rules is whether the Proposed Offering would be a public offering pursuant to IM-5635-3.
 
According to the information you provided, prior to the public announcement of the Proposed Offering, the company would spend approximately four days contacting and meeting with approximately 30 to 40 institutional investors to identify potential core institutional investors. These institutions would be asked to sign confidentiality agreements or otherwise commit to maintain the confidentially of any material non-public information. If the company determines to proceed with the Proposed Offering, then shortly after the close of the market the company would file a preliminary prospectus with the Securities and Exchange Commission specifying the number of shares to be offered and publicly announce the Proposed Offering by means of a press release that would contain information about the offering including how to obtain a copy of the preliminary prospectus. The Proposed Offering would be conducted by underwriters on a firm commitment basis. The shares which would be issued would be registered under the company’s effective shelf registration statement.
 
You stated that promptly after the public announcement, the underwriters would undertake a broad and active marketing effort in the United States and Europe from approximately 4:30 p.m. EDT until shortly before the opening of the market the morning after the public announcement. During that period, the underwriters would expect to: (i) conduct a road show with the company involving telephonic or in-person meetings with approximately 30 to 40 institutional investors; (ii) make available an internet road show to prospective investors; (iii) undertake retail marketing through a network of more than 1,500 brokers to several thousand retail accounts; and (iv) distribute electronic copies of the preliminary prospectus to more than 100 prospective institutional investors and more than 1,500 retail brokers.
 
You stated that the Proposed Offering would be priced shortly before the opening of the market the morning after the public announcement at a discount to the prior day’s closing price in a range, approximately 5 % to 10%, expected to be customary for underwritten offerings of comparable companies. In addition, you stated that you expect purchasers in the Proposed Offering will include 15 to 30 or more institutional investors and 300 to 500 retail investors. The number of shares that would be issued in the Proposed Offering exceeds 20% of the company’s pre-transaction shares of outstanding common stock.
 
Following our review of the information you provided, we have determined that the Proposed Offering would be a public offering under IM-5635-3 because: (i) the offering would be a firm commitment offering of registered securities; (ii) the offering would be broadly marketed to both retail and institutional potential investors; (iii) the company expects that there would be many purchasers in the offering including both retail and institutions; (iv) the discount to the market is expected to be in a range consistent with underwritten offerings of comparable companies; and (v) the company would have little control over the Proposed Offering. Accordingly, because the Proposed Offering would be a public offering, shareholder approval would not be required under the Rules, and the Proposed Offering would not affect the compliance of the Prior Offering with the Rules. NASDAQ is expressing no opinion on whether shareholder approval is required under any other provision of Listing Rule 5635.
 
Publication Date*: 7/31/2012 Mailto Link Identification Number: 731
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