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Notice

Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the American Stock Exchange LLC Relating to Initial and Continued Listing Standards

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Start Preamble November 22, 2002.

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),[1] and Rule 19b-4 thereunder,[2] notice is hereby given that on November 20, 2002, the American Stock Exchange LLC (“Amex” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, 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 from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The Amex proposes to amend Sections 101, 102, and 1003 of the Amex Company Guide to modify initial and continued listing standards. The text of the proposed rule change is below. Proposed new language is in italics; proposed deletions are in brackets.

* * * * *

American Stock Exchange LLC Company Guide

Section 101

(a) through (c)—No Change. Start Printed Page 72240

(d) Initial Listing Standard 4

(1) Total Value of Market Capitalization—$75,000,000; or

Total assets and total revenue—$75,000,000 each in its last fiscal year, or in two of its last three fiscal years.

(2) Aggregate Market Value of Publicly Held Shares—$20,000,000.

(3) Distribution “ See Section 102(a).

([d]e) Alternative Listing Standards

The securities of certain issuers which do not satisfy any of the Initial Listing Standards set forth in paragraphs (a)-([c]d) of this Section may be eligible for initial listing pursuant to the appeal procedures and the Alternative Listing Standards specified in Section 1203(c).

Additional criteria applicable to various classes of securities and issuers are set forth below. Applicants should also consider the policies regarding conflicts of interest, independent directors and voting rights described in §§ 120-125.

Commentary .01—No Change.

Section 102

(a)—No Change.

(b) Stock Price/Market Value of Shares Publicly Held—The Exchange requires a minimum market price of $3 per share for applicants seeking to qualify for listing pursuant to Section 101 (a), [or] (b) or (d), and $3,000,000 aggregate market value of publicly held shares for applicants seeking to qualify for listing pursuant to Section 101(a). In certain instances, however, the Exchange may favorably consider listing an issue selling for less than $3 per share after considering all pertinent factors, including market conditions in general, whether historically the issue has sold above $3 per share, the applicant's capitalization and the number of outstanding and publicly-held shares of the issue.

(c)—No change.

* The terms “public distribution” and “public shareholders” as used in the Company Guide include both shareholders of record and beneficial holders, but are exclusive of the holdings of officers, directors, controlling shareholders and other concentrated (i.e. 10% or greater), affiliated or family holdings.

* * * * *

Section 1003

* * * * *

(a) Financial Condition and/or Operating Results—The Exchange will normally consider suspending dealings in, or removing from the list, securities of a company which:

(i) has stockholders' equity of less than $2,000,000 if such company has sustained losses from continuing operations and/or net losses in two of its three most recent fiscal years; or

(ii) has stockholders' equity of less than $4,000,000 if such company has sustained losses from continuing operations and/or net losses in three of its four most recent fiscal years; or

(iii) has stockholders' equity of less than $6,000,000 if such company has sustained losses from continuing operations and/or net losses in its five most recent fiscal years; or

(iv) has sustained losses which are so substantial in relation to its overall operations or its existing financial resources, or its financial condition has become so impaired that it appears questionable, in the opinion of the Exchange, as to whether such company will be able to continue operations and/or meet its obligations as they mature.

However, the Exchange will not normally consider suspending dealings in, or removing from the list, the securities of a company which is below any of standards (i) through (iii) above if the company is in compliance with the following:

(1) Total value of market capitalization* of at least $50,000,000; or total assets and revenue of $50,000,000 each in its last fiscal year, or in two of its last three fiscal years; and

(2) The company has at least 1,100,000 shares publicly held, a market value of publicly held shares of at least $15,000,000 and 400 round lot shareholders.

Companies falling below one of the above standards and considering a combination with an unlisted company should see Section 341 for the discussion of the Exchange's listing policies contained therein.

*Market capitalization for purposes of Section 1003 includes the total common stock outstanding (excluding treasury shares) as well as any common stock that would be issued upon conversion of another outstanding equity security, if such other security is a “substantial equivalent” of common stock. Generally, the security must be (1) publicly traded or quoted, or (2) convertible into a publicly traded or quoted security. A convertible security will be considered the “substantial equivalent” of common stock if the convertible security is presently convertible, and the conversion price is equal to or less than the current market price of the common stock. For partnerships, the current capital structure will be analyzed to determine whether it is appropriate to include other publicly traded or quoted securities in the calculation.

* * * * *

(b) Not applicable.

(c) Not applicable.

* * * * *

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

In its filing with the Commission, the Exchange 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 these 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 aspects of such statements.

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

1. Purpose

Based upon an evaluation of trends and developments within the Amex listed company community, as well as public issuers generally, the Exchange is proposing to modify initial and continued listing standards to enable it to evaluate listing eligibility against broader and more in-depth measures of financial condition. Specifically, some financially sound issuers may be unable to satisfy the shareholders' equity requirement contained in existing listing standards as a result of certain accounting conventions. An issuer may be forced to write-off goodwill associated with merger and acquisition activity or take significant depreciation charges which are customary in a particular industry (e.g., telecommunications) which could have the effect of reducing the issuer's shareholders' equity and income.[3]

Accordingly, the Exchange is proposing to adopt a new initial listing standard (in addition to existing standards) which is designed to permit an assessment of an issuer's suitability for listing on the basis of compliance with total market capitalization or total Start Printed Page 72241assets and revenues in substitution of shareholders' equity. As accounting requirements become increasingly complex, it is important to provide such alternative criteria so that financially sound issuers are not precluded from listing on the Exchange solely on the basis of particular accounting conventions. Specifically, the new initial listing standard would require the following:

Total value of market capitalization: $75 million, or

Total assets and total revenue: $75 million each (in most recent fiscal year or two of last three most recently completed fiscal years)

Price: $3

Market value of public float: $20 million

Public float shares/public stockholders: 500,000/800 or 1 million/400 or 500,000/400 (plus average daily volume of 2,000 shares)

The Exchange states that the proposed new standard is not materially different from standards in place at other marketplaces and is consistent with existing Amex listing standards. In this regard it should be noted that both the New York Stock Exchange (“NYSE”) and Nasdaq listing standards contain a variety of alternative qualifications standards, including standards based on measures of market capitalization, revenue and assets.

It is also proposed that corresponding revisions be adopted to the continued listing standards to provide that a listed company will not be subject to delisting (assuming compliance with other applicable standards) even if it has experienced net losses or losses from continuing operations, and does not satisfy existing equity requirements [4] if it is in compliance with the following requirements:

  • Total value of market capitalization: $50 million, or
  • Total assets and revenue: $50 million each (in most recent fiscal year or two of last three most recently completed fiscal years), and
  • At least 1,100,000 shares publicly held, a market value of publicly held shares of at least $15,000,000 and 400 round lot shareholders.

The Exchange believes that an issuer with significant market capitalization or assets and revenue should be able to continue its listing despite several years of losses (and assuming compliance with other applicable continued listing standards), in that these financial measures are generally an indication of a company's strength.

2. Statutory Basis

The Exchange believes that the proposed rule change is consistent with the provisions of Section 6(b) of the Act [5] in general, and furthers the objectives of Section 6(b)(5) [6] in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in 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. Specifically, the Exchange believes that the proposed rule change will allow for the evaluation of an issuer's listing eligibility against more meaningful and comprehensive criteria. The Exchange also believes that the proposed rule change will provide investors and potential investors in the securities that would be eligible for listing with the benefits inherent in an Amex listing. According to the Exchange, these benefits include: comprehensive regulation; transparent price discovery and trade reporting to facilitate best execution; and increased depth and liquidity resulting from the confluence of order flow found in an auction market environment.

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 that is not necessary or appropriate in furtherance of the purposes of the Act.

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

The Exchange has neither solicited nor received written comments on the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission will:

(A) By order approve such proposed rule change, or

(B) Institute proceedings to determine whether the proposed rule change should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 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 inspection and copying in the Commission's Public Reference Room. Copies of such filing will also be available for inspection and copying at the principal office of the Exchange. All submissions should refer to File No. SR-Amex-2002-97 and should be submitted by December 26, 2002.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[7]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  A number of large telecommunications issuers report significant deficit equity. For example, Cablevisions Systems Corporation (NYSE:CVC) reported a deficit of $1.8 billion; Nextel Communications, Inc. (Nasdaq NMS: NXTL) reported a deficit of $479 million; and Level 3 Communications Inc. (Nasdaq NMS: LVLT) reported a deficit of $78 million as of each issuer's most recent periodic SEC filing. Similarly, Amazon.com, Inc. (Nasdaq NMS: AMZN) reported a deficit of $1.5 billion.

Back to Citation

4.  Section 1003(a) of the Amex Company Guide provides that a listed company which has sustained losses in two of its three, three of its four, or five of its most recent fiscal years will be subject to delisting if its stockholders' equity is less than $2 million, $4 million or $6 million, respectively.

Back to Citation

[FR Doc. 02-30667 Filed 12-3-02; 8:45 am]

BILLING CODE 8010-01-P