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  Listing Council Decision 2011-6
Identification Number 599
Rule 5101:  NASDAQ is entrusted with the authority to preserve and strengthen the quality of and public confidence in its market. NASDAQ stands for integrity and ethical business practices in order to enhance investor confidence, thereby contributing to the financial health of the economy and supporting the capital formation process. NASDAQ Companies, from new public Companies to Companies of international stature, are publicly recognized as sharing these important objectives. NASDAQ, therefore, in addition to applying the enumerated criteria set forth in the Listing Rule 5000 Series, has broad discretionary authority over the initial and continued listing of securities in NASDAQ in order to maintain the quality of and public confidence in its market, to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and to protect investors and the public interest. NASDAQ may use such discretion to deny initial listing, apply additional or more stringent criteria for the initial or continued listing of particular securities, or suspend or delist particular securities based on any event, condition, or circumstance that exists or occurs that makes initial or continued listing of the securities on NASDAQ inadvisable or unwarranted in the opinion of NASDAQ, even though the securities meet all enumerated criteria for initial or continued listing on NASDAQ. In all circumstances where the Listing Qualifications Department (as defined in Listing Rule 5805) exercises its authority under Listing Rule 5101, the Listing Qualifications Department shall issue a Staff Delisting Determination under Listing Rule 5810 (c)(1), and in all circumstances where an Adjudicatory Body (as defined in Listing Rule 5805) exercises such authority, the use of the authority shall be described in the written decision of the Adjudicatory Body.
Issue:  The company was delisted by a Hearings Panel for public interest concerns, finding that it was not appropriate to maintain the listing of a company that is a public shell when a proposed merger designed to resolve the deficiency would not occur for some months, and a listing in the meantime may signal a determination that the resulting entity meets all NASDAQ requirements for listing, a determination it noted had not and could not make at that time. The Hearings Panel also noted that, while the information provided suggested the new entity would meet the quantitative standards, those are not the only standards required for approval. The Hearings Panel noted that the merger was contingent upon the company retaining its listing, and there appear to be no obvious synergies between the two companies and their past, current, and future operations. As such, the Hearings Panel concluded that merger partner’s interest in the company is the NASDAQ listing, which it further concluded raised legitimate questions about the merger’s benefits to shareholders and investors. Subsequent to the issuance of the Hearings Panel Decision, the company filed a Form 8-K with the Securities and Exchange Commission that disclosed the mutual termination of the merger agreement.
Determination:  Affirmed. After a review of the record in this matter, the Listing Council affirms the Hearings Panel Decision. Upon review of the record and the disclosure concerning the termination of the merger agreement, the Listing Council concludes that the company is a shell and should be delisted. The issue before the Listing Council is whether a company with minimal employees, no operating business, and no appreciable revenues on a pro-forma basis over an extended period should be afforded continued listing, albeit suspended from trading on NASDAQ, while it seeks additional merger partners. The Listing Council does not believe this is in the best interests of stockholders or the investing public. The company has had more than one planned or contemplated merger fall through in the past six months and there is no evidence that a near term merger will be completed.
Pursuant to Listing Rule 5101, NASDAQ has “broad discretionary authority” over the listing of securities on NASDAQ “in order to maintain the quality of and public confidence in the market, to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade and to protect investors and the public interest.” This authority stems directly from NASDAQ’s delegated responsibilities under the Securities Exchange Act of 1934.  The Listing Council does not believe that allowing the company to remain listed with minimal employees, no operations, and no merger transaction on the horizon would in any way serve to protect the investing public.
Accordingly, the Listing Council affirms the Panel decision to delist the company’s securities based on the exercise of the broad discretionary authority of Listing Rule 5101.
Publication Date*: 7/31/2012 Mailto Link Identification Number: 599
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