In response to the effect of the COVID-19 crisis on the public equity markets, Nasdaq is extending the time it will give a listed company to regain compliance with Nasdaq’s listing standards if its closing bid price falls below $1.00 for 30 consecutive trading days. The rule change allows for extra time from April 16, 2020 through June 30, 2020. As an example, a company that was 60 days into its initial 180-day cure period as of April 16 will now have 120 days from July 1, 2020 to regain compliance. The same extension applies to Nasdaq-listed companies that drop below the applicable $15 million, $5 million or $1 million thresholds in the Nasdaq rules for the market value of publicly held shares. Companies currently in a hearing process will return on July 1, 2020 to their position at April 16.
Notably, the 30-trading day measurement periods for those listing requirements are not being paused. Nasdaq will continue to notify companies that do not comply with these standards, and those companies will still need to file a Form 8-K to announce their receipt of a non-compliance notification. However, their initial 180-day time period for regaining compliance will not begin to run until July 1, 2020.
Companies may use this extra time to take remedial action. These actions could include determining an appropriate reverse stock split ratio once share prices stabilize, raising equity capital in an orderly manner in a way that would increase their market capitalization without unduly diluting existing shareholders, or, in some cases, letting their stock prices return to more normalized levels. The extra time will also permit management and boards of affected companies to focus on their business challenges during the coming weeks instead of the company’s listing status.
Visit our COVID-19 Resource Center often for up-to-date information to help you stay informed of the legal issues related to COVID-19.