Davis Polk & Wardwell Newsflash

Nasdaq Modifies SPAC Listing Proposal; SEC Publishes NYSE SPAC Listing Proposal for Comment

March 17, 2008

The Nasdaq Stock Market (“Nasdaq”) has modified and refiled with the Securities and Exchange Commission (“SEC”) its previously proposed rule change that would permit special purpose acquisition companies, commonly referred to as “SPACs”, to list on Nasdaq.  Under the new proposal, the SPAC would not be required to use cash consideration in completing a qualifying business combination as was required in Nasdaq’s initial proposal.

Under Nasdaq’s current proposal, SPACs seeking to list their securities on Nasdaq would be subject to both Nasdaq’s general initial listing requirements as well as the following additional criteria:

(a) Gross proceeds from the initial public offering must be deposited in a trust account maintained by an independent trustee, an escrow account maintained by an "insured depository institution," as that term is defined in Section 3(c)(2) of the Federal Deposit Insurance Act or in a separate bank account established by a registered broker or dealer (collectively, a “deposit account”).

(b) Within 36 months of the effectiveness of its IPO registration statement, the company must complete one or more business combinations having an aggregate fair market value of at least 80% of the value of the deposit account (excluding any deferred underwriters fees and taxes payable on the income earned on the deposit account) at the time of the agreement to enter into the initial combination.

(c) Until the company has satisfied the condition in paragraph (b) above, each business combination must be approved by a majority of the company’s independent directors.

(d) Until the company has satisfied the condition in paragraph (b) above, each business combination must be approved by a majority of the shares of common stock voting at the meeting at which the combination is being considered.

Until the company completes a business combination meeting the criteria in paragraph (b) above, it must notify Nasdaq about each business combination.  In addition, following each business combination, the combined company must meet the requirements for initial listing. 

The new filing also contemplates publication and approval by the SEC and a comment period while the original proposal contemplated that it would be effective immediately.

Separately, the SEC has published the proposal filed by the New York Stock Exchange (“NYSE”) to allow the listing of SPACs.  The NYSE proposal will be subject to a 21-day comment period beginning upon publication in the Federal Register, which should occur shortly.

If you have any questions regarding this newsflash, please call your Davis Polk contact.

Davis Polk & Wardwell