Starting January 30, 2025, the time frame for a listed company to inform Nasdaq about a reverse stock split will shift from five (5) business days to ten (10) calendar days, aligning with SEC Rule 10b-17 of the Securities Exchange Act of 1934. However, Nasdaq will maintain the current requirement for a public announcement of the reverse stock split to be made at least two (2) business days (by 12 p.m. ET) before the expected market effective date.
-
Inform Nasdaq of specific details regarding the reverse stock split by no later than 12 p.m. ET at least ten (10) calendar days before the anticipated market effective date (a change from the current requirement of five (5) business days).
-
Publicly announce the reverse stock split by 12 p.m. ET at least two (2) business days prior to the expected market effective date (this part remains unchanged).
According to the new regulations, a listed company performing a reverse stock split must:
To inform market participants about future reverse stock splits, Nasdaq will publish announcements in the Daily List and in an Equity Corporate Action Alert during the two business days leading up to the market effective date. Both announcements can be found on the Nasdaq Trader website.
Nasdaq will not execute a reverse stock split unless the aforementioned requirements have been met, and will halt trading in any security from an issuer that enacts a reverse stock split without fulfilling these obligations. Notably, the notification form requires the company to provide the new CUSIP number, the dates when board and shareholder approvals were obtained (if necessary), and when the DTC made the new CUSIP eligible. These steps must occur prior to the company’s submission of the notification.
Which companies are affected?
Any company listed on the Nasdaq Global Select, Global, or Capital Market tiers that plans to carry out a reverse stock split.
What are the updated notification requirements?
Under the revised Rule 5250(e)(7), a company must inform Nasdaq about a reverse stock split no later than 12 p.m. ET at least ten calendar days before the market effective date by submitting a complete Company Event Notification Form, which must also include a draft of the company’s public disclosure.
What remains the same regarding disclosure requirements?
Under Rule 5250(b)(4), a company is still required to publicly disclose the reverse stock split no later than 12 p.m. ET at least two business days before its market effective date. Nasdaq will subsequently publish this information in the Daily List and in an Equity Corporate Action Alert following the company’s announcement. Additionally, pursuant to Rule 5250(b)(1) and IM-5250-3, the company must notify Nasdaq’s MarketWatch Department at least ten minutes prior to the public disclosure if the information is released between 7:00 a.m. and 8:00 p.m. ET. For releases outside these hours, the company must notify MarketWatch before 6:50 a.m. ET.
What happens if the new rules are not followed?
If a company attempts to implement a reverse stock split without timely fulfilling the notification or disclosure requirements or provides incorrect or incomplete information regarding the timing or ratio of the split in its public announcement, Nasdaq will halt trading of that stock.
What should be considered regarding reverse stock splits?
Companies need to thoughtfully consider how to manage fractional shares in consultation with their transfer agents and advisors before releasing any public statements about anticipated reverse stock splits.
Who can I contact for more information?
Companies with questions about the updated notification requirements should reach out to Nasdaq Corporate Data Operations at +1 877 308 0523.
For inquiries concerning the handling of fractional shares, companies can contact the Nasdaq Market Intelligence Desk at +1 888 437 5242.
To inquire about the new disclosure requirements, companies should contact Nasdaq MarketWatch at +1 301 978 8500.
