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Frequently Asked Questions
  Staff Interpretation Letter 2005-24
Identification Number 871
This is in response to your letters regarding the applicability of The NASDAQ Stock Market’s shareholder approval requirements to an issuance of securities in a private placement (the “Transaction”).  Specifically, you asked about the potential applicability of Marketplace Rules 4350(i)(1)(B) and 4350(i)(1)(D) (the “Rules”).
 
According to the information you provided, in the Transaction the company would issue notes convertible into shares of the company’s common stock at a price not less than the closing bid price immediately preceding the execution of the definitive agreement (“Market Value”).  The conversion price will not be subject to any adjustment provision that could reduce it to less than Market Value.  Based on the current bid price and assuming full conversion, the issuance of common stock would equal approximately 36% of the company’s pre-transaction outstanding shares.
 
You stated that  no investor individually, or as part of a group, can beneficially own, or have the right to acquire, more than 19.99% of the company’s outstanding common shares or the voting power of the company on a post-transaction basis.  The proceeds will be used for working capital purposes and to repay a loan.
 
Following our review of the information you submitted, we have concluded that the Transaction as described in your correspondence does not require shareholder approval under the Rules.  Specifically, the Transaction does not require shareholder approval under Listing Rule 4350(i)(1)(D) because the issuance of the Shares, although in excess of 20% of the pre-transaction outstanding shares, will be at a price that is not less than the greater of book or market value.  Further, given the ownership restrictions described above, the Transaction will not result in a change of control and will not require shareholder approval under Listing Rule 4350(i)(1)(B).
 
Publication Date*: 7/31/2012 Mailto Link Identification Number: 871
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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