Document ID: SEC-2022-0314-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange LLC
Posted Date: 2022-03-08T05:00Z

[Federal Register Volume 87, Number 45 (Tuesday, March 8, 2022)]
[Notices]
[Pages 13036-13038]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-04836]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94349; File No. SR-NYSE-2021-45]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 
2, To Adopt Listing Standards for Subscription Warrants Issued by a 
Company Organized Solely for the Purpose of Identifying an Acquisition 
Target

March 2, 2022.

I. Introduction

    On August 24, 2021, New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to adopt listing standards for 
subscription warrants issued by a company organized solely for the 
purpose of identifying an acquisition target. The proposed rule change 
was published for comment in the Federal Register on September 10, 
2021.\3\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 92876 (September 3, 
2021), 86 FR 50748. Comments received on the proposal are available 
on the Commission's website at: https://www.sec.gov/comments/sr-nyse-2021-45/srnyse202145.htm.
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    On September 30, 2021, pursuant to Section 19(b)(2) of the Exchange 
Act,\4\ the Commission designated a longer period within which to 
approve the proposed rule change, disapprove the proposed rule change, 
or institute proceedings to determine whether to disapprove the 
proposed rule change.\5\ On December 8, 2021, the Commission instituted 
proceedings under Section 19(b)(2)(B) of the Exchange Act \6\ to 
determine whether to approve or disapprove the proposed rule change.\7\
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    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 93221, 86 FR 55662 
(October 6, 2021). The Commission designated December 9, 2021 as the 
date by which the Commission shall approve or disapprove, or 
institute proceedings to determine whether to approve or disapprove, 
the proposed rule change.
    \6\ 15 U.S.C. 78s(b)(2)(B).
    \7\ See Securities Exchange Act Release No. 93741, 86 FR 71111 
(Dec. 14, 2021).
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    On March 1, 2022, the Exchange filed Amendment No. 2 to the 
proposed rule change, which replaced the proposed rule change as 
originally filed and superseded such filing in its entirety.\8\ 
Amendment No. 2 to the proposed rule change is described in Items II 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change, as modified by Amendment No. 2, from interested 
persons.
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    \8\ Amendment No. 2 is available at: https://www.sec.gov/comments/sr-nyse-2021-45/srnyse202145.htm. On February 17, 2022, the 
Exchange filed Amendment No. 1 to the proposed rule change. The 
Exchange withdrew Amendment No. 1 on March 1, 2022.
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II. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the NYSE Listed Company Manual 
(``Manual'') to adopt a new listing standard for the listing of 
Subscription Warrants. The proposed rule change is available on the 
Exchange's website at www.nyse.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

III. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
Amendment No. 2 to SR-NYSE-2021-45
    The Exchange has previously filed a proposed rule change to permit 
the listing of Subscription Warrants.\9\ Amendment No. 2 to SR-NYSE-
2021-45 proposes to:
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    \9\ See SR-NYSE-2021-45. On February 17, 2022, the NYSE 
submitted Amendment No. 1, which was subsequently withdrawn.
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     Provide that Subscription Warrants with respect to which 
the exercise price is tendered after execution of an Acquisition 
Agreement will not actually be exercised until consummation of the 
company's business combination;
     state that the Subscription Warrants must provide for a 
period of at least 20 business days after effectiveness of such post-
effective amendment or new registration statement during which holders 
may elect to exercise Subscription Warrants effective upon closing of 
the Acquisition, which period may expire prior to the date of 
consummation of the Acquisition. The terms of the Subscription Warrants 
must not in any other way limit the ability of holders to exercise such 
Subscription Warrants in full;
     specify that Subscription Warrants must be issued for no 
consideration to the securityholders of a previously existing company;
     increase from 1.1 million to 20 million the number of 
publicly-held Subscription Warrants that must be outstanding at the 
time of initial listing;
     state that a Subscription Warrant may provide by its terms 
that the issuer may (1) determine, at issuance, that each Subscription 
Warrant may be exercisable for a specified number of shares greater 
than one share; and (2) determine, at the time it enters into an 
Acquisition Agreement, that the exercise price per share may be 
increased above the exercise price specified at the time of original 
issuance;
     provide that the Subscription Warrants must have an 
opening trading price on the first day of listing of at least $1.00 per 
Subscription Warrant;
     provide that the Subscription Warrants may not be tendered 
for exercise into common stock of a company until after such company 
has complied with all requirements of the federal securities laws with 
respect to such exercise, including, as appropriate, the filing and 
effectiveness of a post-effective amendment to the registration 
statement filed in connection with the original distribution of the 
Subscription Warrants or the filing and effectiveness of a new 
registration statement in connection with the exercise of such 
Subscription Warrants;
     state that the shares will be issued to the tendering 
holders of Subscription Warrants and the proceeds released to the 
issuer by the independent custodian at the time of closing of the 
Acquisition;
     state that the independent custodian will promptly return 
the funds tendered in payment of the exercise price of Subscription 
Warrants to the tendering holders (A) upon termination of the 
Acquisition Agreement; or (B) if the Acquisition does not close within 
twelve months from the date of entry into the definitive

[[Page 13037]]

agreement with respect to the Acquisition or such earlier time as is 
specified in the operative agreements;
     increase the continued listing requirement with respect to 
the number of publicly-held Subscription Warrants from 100,000 to five 
million; and
     provide for the commencement of immediate suspension and 
delisting procedures when the average trading price of the Subscription 
Warrants is less than $0.25 over 30 consecutive trading days.
    This Amendment No. 2 to SR-NYSE-2021-45 replaces SR-NYSE-2021-45 as 
originally filed and supersedes such filing in its entirety.
Subscription Warrants
    The Exchange proposes to adopt a new subsection of Section 102 of 
the Manual (to be designated Section 102.09) to permit the listing of 
Subscription Warrants. For purposes of proposed Section 102.09 a 
Subscription Warrant is a warrant issued by a company organized solely 
for the purpose of identifying an acquisition target and is exercisable 
into the common stock of such company only upon consummation of such 
acquisition.
Initial Listing Standards for Subscription Warrants
    The Exchange will list Subscription Warrants subject to the 
following requirements:
    (i) The issuer of the Subscription Warrants must be a company 
formed solely for the purpose of issuing the Subscription Warrants and 
consummating the acquisition of one or more operating businesses or 
assets with a value (calculated at the time of entry into the 
acquisition agreement) equal to at least 80% of the aggregate exercise 
price of the Subscription Warrants (an ``Acquisition''). The 
Subscription Warrants must be issued for no consideration to the 
securityholders of another previously existing company.
    (ii) For a transaction to qualify as an Acquisition, the resultant 
entity must qualify for initial listing on the Exchange and the 
acquisition agreement must provide that the transaction will be 
consummated only if the resultant entity will be listed on the Exchange 
or another national securities exchange.
    (iii) At the time of initial listing, the Subscription Warrants 
must: (A) Have an aggregate exercise price of at least $250 million; 
(B) have at least 20 million publicly held Subscription Warrants 
outstanding, with an aggregate exercise price of at least $200 million; 
(C) have at least 400 holders of round lots; (D) have an exercise price 
per share of common stock of at least $10.00; (E) have an opening 
trading price on the first day of listing of at least $1.00 per 
Subscription Warrant; and (F) expire in no more than 10 years. For 
purposes of proposed Section 102.09, public holders of Subscription 
Warrants do not include those held by directors, officers, or their 
immediate families and other concentrated holdings of 10 percent.
    (iv) A Subscription Warrant may provide by its terms that the 
issuer may (1) determine, at issuance, that each Subscription Warrant 
may be exercisable for a specified number of shares greater than one 
share; and (2) determine, at the time it enters into an Acquisition 
Agreement, that the exercise price per share may be increased above the 
exercise price specified at the time of original issuance of such 
Subscription Warrants.
    (v) The distribution of the Subscription Warrants and the issuance 
of the common stock of the issuer upon exercise of the Subscription 
Warrants must both be registered under the Securities Act.
    (vi) The Subscription Warrants may not be tendered for exercise 
into common stock of a company until after such company has (A) entered 
into a binding agreement with respect to the Acquisition; and (B) 
complied with all requirements of the federal securities laws with 
respect to such exercise, including, as appropriate, the filing and 
effectiveness of a post-effective amendment to the registration 
statement filed in connection with the original distribution of the 
Subscription Warrants or the filing and effectiveness of a new 
registration statement in connection with the exercise of such 
Subscription Warrants.
    (vii) Subscription Warrants must provide for a period of at least 
20 business days after effectiveness of such post-effective amendment 
or new registration statement during which holders may elect to 
exercise Subscription Warrants effective upon closing of the 
Acquisition, which period may expire prior to the date of consummation 
of the Acquisition. The terms of the Subscription Warrants must not in 
any other way limit the ability of holders to exercise such 
Subscription Warrants in full.
    (viii) The proceeds of the exercise of the Subscription Warrants 
will be held in an interest-bearing custody account controlled by an 
independent custodian, pending the closing of such Acquisition. The 
shares will be issued to the tendering holders of Subscription Warrants 
and the proceeds released to the issuer by the independent custodian at 
the time of closing of the Acquisition.
    (ix) The independent custodian will promptly return the funds 
tendered in payment of the exercise price of Subscription Warrants to 
the tendering holders: (A) Upon termination of the Acquisition 
Agreement; or (B) if the Acquisition does not close within twelve 
months of entry into the definitive agreement with respect to the 
Acquisition, or such earlier time as is specified in the operative 
agreements. Such holders will receive cash payments equal to their 
proportional share of the funds in the custody account, including any 
interest earned on those funds.
    (x) The issuer of the Subscription Warrants will be subject to the 
same corporate governance requirements under Section 303A hereof as an 
issuer of listed common stock.
    (xi) The Acquisition must be approved by a majority of the 
independent directors of the issuer of the Subscription Warrants.
Continued Listing Standards for Subscription Warrants
    The Exchange will immediately initiate suspension and delisting 
procedures of an issuer's Subscription Warrants if:
     The number of publicly-held Subscription Warrants is fewer 
than five million;
     the number of public holders of such Subscription Warrants 
is fewer than 100;
     the total market capitalization of such Subscription 
Warrants is below $15 million over 30 consecutive trading days; or
     the average trading price of the Subscription Warrants is 
less than $0.25 over 30 consecutive trading days.
    For purposes of the foregoing, public holders of Subscription 
Warrants do not include those held by directors, officers, or their 
immediate families and other concentrated holdings of 10 percent.
    An issuer of Subscription Warrants will not be eligible to follow 
the procedures outlined in Sections 802.02 and 802.03 with respect to 
the criteria set forth above and any such security will be subject to 
delisting procedures as set forth in Section 804.00.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b)(5) of the Act,\10\ in that it is designed to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to,

[[Page 13038]]

and facilitating transactions in securities, to remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest, and is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \10\ 15 U.S.C. 78f(b)(5).
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    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an additional type of security that will, in turn, enhance competition 
among market participants, to the benefit of investors and the 
marketplace.
    Furthermore, the Exchange believes that the proposed listing 
standard is consistent with Section 6(b)(5) of the Act in that it 
contains requirements in relation to the listing of Subscription 
Warrants that provide adequate protections for investors and the public 
interest. In particular, the Exchange believes that the proposed rule 
provides important investor protections including, but not limited to, 
providing that: (1) The issuer cannot accept Subscription Warrants for 
exercise until it has entered into a definitive Acquisition Agreement 
and filed and obtained effectiveness of a registration statement with 
respect to such exercise; (2) cash tendered by Subscription Warrant 
holders in payment of the exercise price will be held in an interest-
bearing account controlled by an independent custodian pending closing 
of the Acquisition; and (3) if the Acquisition is terminated or does 
not close within 12 months of the date of the Acquisition Agreement, 
the tendering holders will receive a distribution of their pro rata 
share of the funds in the custody account.
    The Exchange also believes that the proposed quantitative standards 
for Subscription Warrants are adequate to protect the interests of 
investors and the public interest. The Exchange notes that the proposed 
requirements that the Subscription Warrants at the time of initial 
listing must have an aggregate exercise price of at least $250 million 
and that there be publicly-held Subscription Warrants with an aggregate 
exercise price of at least $200 million significantly exceeds the 
listing requirements for SPACs set forth in Section 102.06 of the 
Manual, which requires a SPAC to have an aggregate market value of $100 
million and a market value of publicly-held shares of $80 million.
    The Exchange believes that its existing surveillance procedures are 
adequate to enable it to detect manipulative trading practices with 
respect to Subscription Warrants. The Exchange notes that the NYSE and 
other self-regulatory organizations have extensive experience in 
conducting surveillance of the trading in securities whose value, like 
that of Subscription Warrants, is substantially dependent on the 
issuer's future acquisition of a yet-to-be-identified operating asset. 
Such similar securities include the common stock and warrants of listed 
special purpose acquisition companies (``SPACs'') and options on listed 
SPAC common stocks. The Exchange also believes that the extensive 
experience that exists in the trading of these kinds of securities 
provides evidence that market participants are generally able to arrive 
at market prices for such securities without excessive volatility and 
that this experience provides a reasonable basis for understanding how 
Subscription Warrants are likely to trade.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed rule would be 
available in a non-discriminatory way to any company satisfying its 
requirements, as well as all other applicable NYSE listing 
requirements. In addition, the proposed rule change does not impose any 
burden on the competition with other listing exchanges; any competing 
exchange could similarly adopt rules to allow the listing of 
Subscription Warrants.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as modified by Amendment No. 2, is consistent with the Act. 
Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSE-2021-45 on the subject line.

Paper Comments

     Send paper comments in triplicate to: Secretary, 
Securities and Exchange Commission, 100 F Street NE, Washington, DC 
20549-1090.

All submissions should refer to File Number SR-NYSE-2021-45. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSE-2021-45 and should be submitted on 
or before March 29, 2022.
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    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-04836 Filed 3-7-22; 8:45 am]
BILLING CODE 8011-01-P