In August, the US Securities and Exchange Commission (SEC) approved a proposed Nasdaq rule change that will implement new listing standards concerning the notification and disclosure of reverse stock splits. Notably, the volume of reverse splits processed by Nasdaq has seen a significant uptick in recent years — with 94 in 2020, 31 in 2021, 196 in 2022, and 164 by as early as June 23, 2023. In the majority of instances, Nasdaq has noted that the rationale behind these reverse splits is to adhere to Nasdaq’s $1 minimum bid price prerequisite to retain a listing position.
The details of this development are available in the full report by Cooley LLP on JD Supra.
A “reverse split” or “reverse stock split” is an action taken by a company to reduce the total number of its outstanding shares thereby, increasing the per-share price. Companies that undertake reverse stock splits often do so to avoid falling below minimum share prices set by stock exchanges.
This development is crucial for legal professionals working within global corporations and law firms given its implications around stock splits, corporate restructuring, and investor relations. It brings into focus the evolving regulatory requirements and expectations around these financial transactions, enhancing market transparency, and bolstering investor confidence.