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  Listing Council Decision 2007-10
Identification Number 630
Rule 4450(b)(1): For continued listing on The NASDAQ Global Market, an issuer must demonstrate either: (A) a market value of listed securities of $50 million; or (B) total assets and total revenue of $50 million each for the most recently completed fiscal year or two of the last three most recently completed fiscal years.
Rule 4350(i)(1)(D)(i): Requires shareholder approval in connection with a transaction other than a public offering involving the sale, issuance or potential issuance by the issuer of common stock (or securities convertible into or exercisable for common stock) at a price less than the greater of book or market value which together with sales by officers, directors or substantial shareholders of the company equals 20% or more of common stock or 20% or more of the voting power outstanding before the issuance.
Issues: At the time of the Panel’s decision, the company did not meet the market value of listed securities/total assets and total revenue requirement for continued listing on The NASDAQ Global Market. In addition, the company violated NASDAQ’s shareholder approval rules by entering into transactions designed to positively impact the company’s market value of listed securities shortfall. As a result, the Panel transferred the company’s securities to The NASDAQ Capital Market, granted the company a short extension to cure the shareholder approval rule violation by gaining shareholder approval for the transactions, and issued a letter of reprimand to the company for the shareholder approval rule violation. The company appealed and requested to be allowed to relist on The NASDAQ Global Market under the less stringent continued listing requirements, and not the more stringent initial listing standards.
Determination: The Listing Council affirms the Panel’s decision and denies the company’s request for an exception to The NASDAQ Global Market continued listing standards. In reaching its determination, the Listing Council applied a facts and circumstances analysis. Based upon its analysis, the Listing Council found that the Panel properly determined that the company did not comply with all of the requirements for continued listing on the Global Market and as a consequence should be delisted from The NASDAQ Global Market. The Listing Council notes that the initial inclusion requirements are the appropriate standards to apply when a company has been delisted from a NASDAQ market. In determining whether to grant an exception to the initial listing requirements, the Listing Council considered, among other things, the company’s behavior before being delisted.
The Listing Council notes that Staff was concerned that the transaction originally contemplated to enable the company to regain compliance with Listing Rule 4450(b)(1) would require shareholder approval, based on the limited information available to Staff at the time. As such, the company was put on notice of staff’s concerns when it received the staff’s Hearing Memo. The Listing Council further notes that the issue of whether shareholder approval was necessary, as a result of the aggregation of the two offerings subsequently contemplated by the company, was raised at the Panel Hearing, and the company stated that it would consult with staff. There is no evidence in the record that the company was proactive in consulting Staff on either occasion. Thereafter, the company completed the offerings and, as a consequence, violated the shareholder approval rules. It was only after staff’s notice of violation of the shareholder approval rules that the company contacted staff. The Panel concluded that the company’s violation of the shareholder approval rule was the result of insufficient attention to its obligations under the rules. The Listing Council also notes that the amount raised through  the transactions was less than discussed at the Panel Hearing, and the company did not provide the Panel with a calculation of the transaction’s impact on market capitalization or projections of continued compliance.
After an examination of the facts and circumstances surrounding this case, the Listing Council denies the company’s request for an exception to list on The NASDAQ Global Market and finds the Panel’s decision to allow the company the opportunity to list on The NASDAQ Capital Market was appropriate at the time it was rendered. Based on the foregoing, the Listing Council affirms the Panel’s decision to transfer the listing of the company’s securities from The NASDAQ Global Market to The NASDAQ Capital Market.
Publication Date*: 7/31/2012 Mailto Link Identification Number: 630
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