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Frequently Asked Questions
  Will Nasdaq consider a transaction to be a Public Offering under IM-5635-3 if only a small number of purchasers participate in the transaction?
Identification Number 1741

Transactions that constitute a Public Offering generally are not subject to Nasdaq’s shareholder approval requirements. 

Generally, a firm commitment underwritten securities offering registered with the SEC will be considered a Public Offering (based on factors described in IM-5635-3) because the underwriter will market the offering and price discovery takes place through the underwriter’s book building process. Nasdaq understands that while underwriters can control their marketing efforts, the ultimate number of purchasers in a transaction is out of control of the issuer and the underwriter.  As such, Nasdaq relies primarily on the marketing efforts in assessing whether a transaction is a Public Offering under IM-5635-3. 

However, structuring an offering as a firm commitment underwritten securities offering does not guarantee that the offering constitutes a Public Offering under IM-5635-3.  For example, Nasdaq has observed firm commitment underwritten offerings that were sold to a small number of purchasers.  Nasdaq believes that such a transaction may be indicative of the lack of true price discovery during the book building process or of an insufficient marketing effort.  In such cases, the transaction may not be considered a Public Offering for purposes of the Nasdaq shareholder approval rules.

In addition, if the Company and its broker dealer indicate to Nasdaq that an offering was broadly marketed, but resulted in a disproportionately small number of purchasers, Nasdaq may investigate the broker dealer, or refer the matter to FINRA for further investigation, to determine whether the marketing efforts were, in fact, consistent with the representations made.


Publication Date*: 6/30/2020 Mailto Link Identification Number: 1741
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