SEC approves NYSE's minimum price definition

03.26.19

The Securities and Exchange Commission (SEC) has approved the New York Stock Exchange’s (NYSE) proposal to amend Sections 312.03 and 312.04 of the NYSE Listed Company Manual, which govern the practice of minimum pricing.

The amendments are very similar to the modifications made by Nasdaq relating to price requirements for purposes of determining whether shareholder approval is required for certain issuances. Just like Nasdaq’s proposal, which the SEC approved last year, the amendments replace the term “market value” with a new term “minimum price,” and eliminate the “book value” measure from the new definition.

For the pricing test used for the exceptions in Sections 312.03(b) and (c) of the NYSE Listed Company Manual, the new term “minimum price” is defined as the lower of: “(i) the Official Closing Price immediately preceding the signing of the binding agreement; or (ii) the average Official Closing Price for the five trading days immediately preceding the signing of the binding agreement.” The term “Official Closing Price” is defined in Section 312.04 as “the official closing price on the Exchange as reported to the Consolidated Tape immediately preceding the entering into of a binding agreement to issue the securities.” Under the amendments, shareholder approval will be required only for transactions that are priced below the minimum price.

With these rule changes, the NYSE, like the Nasdaq before it, recognizes that the risks of using a trailing average to determine minimum price are now readily accepted by the market, such that giving NYSE-listed companies the flexibility to use such a measure should not always engender the need for shareholder approval.