On November 1, 2023, the SEC approved new Nasdaq rules on notification and disclosure of reverse stock splits. Under the new rules, a listed company conducting a reverse stock split must:
- Notify Nasdaq of certain details of the reverse stock split at least five business days prior to the anticipated market effective date (rather than our current rule requiring 15-days notice)
- Publicly disclose the reverse stock split by noon ET at least two business days prior to the anticipated market effective date
Nasdaq believes that shortening the current notification requirement from 15 days to five will allow companies to provide complete submissions, whereas the current 15-day requirement results in initially incomplete submissions that are updated, sometimes at the last minute. Nasdaq also believes that the minimum two business day public notice will allow market participants to timely update their systems, which will help to reduce the risk that investors and brokers inadvertently miss the public announcement of the reverse stock split, and continue to make or accept trades at the pre-split price.
To notify market participants, Nasdaq will publish announcements of reverse stock splits on the Daily List and in an Equity Corporate Action Alert for the two business days prior to the market effective date. These are both available on the Nasdaq Trader website.
Nasdaq will not process and effect a reverse stock split unless the above requirements have been satisfied, and will halt trading in the security of any issuer that effects a reverse stock split without meeting these requirements.
In addition, Nasdaq has a pending proposal to impose a regulatory halt of a Nasdaq-listed security starting around 7:50 p.m. ET on the day immediately before the market effective date of a reverse stock split, and re-opening at around 9:00 a.m. ET on the effective day of a reverse stock split. We expect this proposal to be approved shortly.
Which companies are covered?
Any company listed on Nasdaq Global Select, Global or Capital Market tiers that is conducting a reverse stock split.
What are the notification requirements?
Under new rule 5250(e)(7), a company must notify Nasdaq about a reverse stock split no later than 12 p.m. ET at least 5 business days prior to the market effective date of the split by submitting a complete Company Event Notification Form. The submission must also include a copy of the company’s draft public disclosure.
What are the disclosure requirements?
Under new Rule 5250(b)(4), a company must provide public disclosure of the reverse stock split no later than 12 p.m. ET at least 2 business days prior to the split’s market effective date. Nasdaq will publish information about the change on the Daily List, following the company’s disclosure.
In addition, under Rule 5250(b)(1) and IM-5250-3, the company must notify Nasdaq’s MarketWatch Department at least ten minutes prior to public disclosure if the release of the material information is made between 7:00 a.m. to 8:00 p.m. ET. If the release of this information is made outside the hours of 7:00 a.m. to 8:00 p.m. ET, the company must notify MarketWatch prior to 6:50 a.m. ET.
What are the consequences of failing to comply with the new rules?
If a company takes legal action to effect a reverse stock split notwithstanding its failure to timely satisfy the notification or disclosure requirements, or provides incomplete or inaccurate information about the timing or ratio of the reverse stock split in its public disclosure, Nasdaq will halt trading in the stock.
Who should I contact with questions?
A company with questions about the new notification requirements should contact Nasdaq Corporate Data Operations at +1 877 308 0523.
A company with questions about the new disclosure requirements should contact Nasdaq MarketWatch at +1 301 978 8500.
