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Frequently Asked Questions
  Staff Interpretation Letter 2007-22
Identification Number 798
This is in response to your correspondence regarding the applicability of NASDAQ’s shareholder approval requirements of Marketplace Listing Rule 4350(i)(1)(D) (the “Rule”) to a proposed issuance (the “Proposed Issuance”) of common stock. You asked whether the Proposed Issuance, which would be less than 20% of the pre-transaction total shares outstanding, would be aggregated with subsequent issuances when determining whether shareholder approval is required under the Rule for those subsequent issuances.
According to the information you submitted, the company has entered into an agreement (the “Agreement”) with the Investment Banker whereby the company would sell shares of its common stock from time to time through the Investment Banker. Each time the company wishes to sell shares under the Agreement, it will send a notice to the Investment Banker setting forth the number of shares to be issued, the time period during which the sales are to be made, the minimum price at which sales may be made, and any limitation on the number of shares to be sold in any one day.  If the Investment Banker accepts the placement notice, it will sell the shares into the existing trading market at the prevailing market price at the time of sale in ordinary brokerage transactions. The sales will be open to all market participants, and the Investment Banker will make the shares available in the same way it makes available any other securities that it is requested to sell by any shareholder of any issuer. The company will have no control over the sale of the shares after submitting a placement notice. No officers or directors of the company would purchase shares in the Proposed Issuance.
You stated that in the vast majority (over 98%) of cases, the Investment Banker will make the sales on an agency basis, not taking ownership of the shares that are sold. However, the Investment Banker will have the flexibility to act as principal to facilitate sales that otherwise might not close. For example, when dealing with sales orders that it may be unable to fill prior to an expiration date without causing downward pressure on the stock price, the Investment Banker may purchase those shares to resell them into the market at the prevailing market price when it could do so without causing a disruption in the market (no more than a few days later).
Following our review of the information you submitted, we have determined that the Proposed Issuance would be a “public offering” under the Rule and therefore does not require shareholder approval under the Rule. As such, the Proposed Issuance would not be aggregated with subsequent issuances that are subject to the Rule. We have reached this conclusion because the sales in the Proposed Issuance would be made directly into the market at the prevailing market prices in ordinary brokerage transactions open to all market participants.
Publication Date*: 7/31/2012 Mailto Link Identification Number: 798
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