On June 14, 2017, the Nasdaq Listing and Hearing Review Council (Nasdaq Listing Council) issued a Comment Solicitation on proposed rule changes to Rule 5635(d) governing shareholder approval of private placement offerings by Nasdaq-listed companies. The full Comment Solicitation is available for download here, including a redline showing proposed changes on the last page of this document. 

The rule changes as proposed would represent significant changes to existing shareholder approval requirements regarding price and methodology of approval under the Nasdaq listing rules. In its Comment Solicitation, the Nasdaq Listing Council referred to Nasdaq's own recent blueprint for revitalizing the U.S. capital markets, and discussed the need to update the shareholder approval rules as evidenced by several comment letters previously received from the public. The shareholder approval rules have not been revised since their adoption in 1990. Presently under the rules, shareholder approval for a private placement is required for the sale of common stock at a price less than the greater of book or market value, which, together with sales by officers, directors, or substantial shareholders, equals 20 percent or more of the common stock or voting power pre-issuance, or where the sale by the company equals 20 percent or more of the common stock or voting power pre-issuance at a price less than the greater of book or market value of the stock. "Market value" is defined under Rule 5005 as the closing bid price.

The Nasdaq Listing Council proposes to adopt an average closing price standard instead of the current "at a price less than the greater of book or market value" standard, as follows: 

at a price less than the average closing price of the common stock (as reflected on Nasdaq.com) for the five trading days immediately preceding the signing of the binding agreement for the issuance.

Additionally, with the proposed adoption of an average closing price standard, the proposed rules as published would trigger the shareholder approval requirement only upon a combination of the 20 percent or more of common stock or voting power test and where the transaction either (A) is at a price less than the average five-day closing price or (B) is not approved by a majority of Independent Directors or committee thereof. The Nasdaq Listing Council noted that the Independent Director requirement would be an added safeguard against misuse of the five-day average price provisions, and could be met by an independent pricing or finance committee. This also represents a significant change from the current shareholder approval requirements.

Comments to the proposed Nasdaq rule changes are due before July 31, 2017