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In our previous post, we discussed the reverse merger as a viable pathway for struggling microcap operating listed public companies and private companies seeking to become public. We outlined the process from preliminary meetings and due diligence through the definitive agreement, Form S-4 filing, shareholder approval, and closing. In this follow-up post, we provide updated guidance focusing on the ways NYSE American listing practice will affect listing strategy for companies pursuing reverse mergers in light of recent private NYSE American exchange staff guidance and rule amendments.
Brief Background
A reverse merger is the acquisition of a public company by a private company, either by the private company itself, or by the owners of the private company. Our previous post focused on reverse mergers between struggling microcap operating listed companies and private companies seeking to become public. This post also focuses on such reverse mergers, as opposed to reverse mergers with public shell companies with no or only nominal operations.
A Recent Rule Change Makes Microcap Initial Public Offerings on NYSE American More Difficult
As discussed in the previous post, a reverse merger with an operating public company may be a more feasible path to access U.S. public capital markets than a traditional initial public offering. Stock exchange rules or policies have made it more difficult for microcap companies to become listed through a traditional IPO. Previously, the NYSE American had an informal policy that IPOs must raise a minimum of $10 million to qualify for listing. On March 27, 2026, the NYSE American LLC Company Guide (the “Company Guide”) was amended to require that “any company listing in connection with an initial public offering … must have a market value of Unrestricted Publicly-Held Shares1 of at least $15,000,000. This requirement must be satisfied from the offering proceeds.”2 As such, like Nasdaq, NYSE American now formally requires at least $15 million to be raised in an IPO for any listing in connection with an IPO. Many microcap public companies are unable to find investment banks that are willing or able to underwrite a $15 million IPO. Accordingly, a reverse merger-type structure with a struggling listed public operating company may now present an even more compelling alternative path to expand a private company’s access to the U.S. capital markets.
Listing applicants should also note that NYSE American (like Nasdaq) has additional listing requirements for transactions that it defines as a “Reverse Merger,” or “any transaction whereby an operating company becomes an Exchange Act [i.e., public] reporting company by combining directly or indirectly with a shell company which is an Exchange Act reporting company, whether through a reverse merger, exchange offer, or otherwise”.3 However, transactions in which the public reporting company is not a shell company are not subject to these requirements. Therefore, references to “reverse merger” in this post and the prior post should be understood to be distinct from the type of transaction that would be considered a “Reverse Merger” under the relevant stock exchange rules.
Meeting the Minimum Bid Price Requirement Through an Exchange Ratio
One of the listing requirements for any NYSE American-listed company is the minimum stock price. As discussed in our previous post, a pre-transaction public company may need to conduct a reverse stock split in order to meet the applicable stock exchange minimum bid price requirement prior to receiving approval of the post-transaction public company’s initial listing application. For reverse merger structures in which the pre-transaction public company will not be the entity that will be listed as the post-transaction public company, and shares of the post-transaction public company will be issued as consideration for the pre-transaction public company’s shares, the exchange ratio – the fraction that each pre-transaction public company share will be multiplied by to determine the number of shares of the post-transaction public company that the share will be exchanged for – is functionally equivalent to a reverse stock split. The NYSE American has recently privately advised that it has determined, as of March 2026, that it will allow the merger share exchange ratio to be used in lieu of a reverse stock split for the post-transaction public company to meet its initial minimum stock price requirement.
There may be several advantages to using an exchange ratio instead of a reverse stock split. First, NYSE American has several listing rules that require immediate suspension and delisting procedures to commence if a listed company uses a reverse stock split if: (1) the cumulative ratio is 200-for-1 or more within a two-year period,4 or (2) the reverse split results in the company’s security falling below any of NYSE American’s continued listing requirements.5 The use of an exchange ratio is not covered by these rules.
Second, in order to implement a reverse stock split, the pre-transaction public company may need to obtain shareholder approval. If the reverse merger structure requires that a registration statement on Form S-4 (or F-4) be filed with the Securities and Exchange Commission (the “SEC”), and either it has been declared effective by the SEC, the related proxy statement/prospectus has already been distributed, or the related meeting has already been held, then the process for gaining shareholder approval for the reverse stock split may significantly lengthen or complicate the reverse merger process.
Third, the NYSE American staff has privately advised that it interprets its rules to require a minimum of ten days’ prior public disclosure of a reverse stock split’s exact ratio to effect a reverse stock split, and a number of other processes to be followed. These requirements may make using a reverse stock split impractical because the volatility of the pre-transaction public company’s stock price may cause the ratio to be too low, resulting in the post-transaction stock price that does not meet the minimum stock price (discussed further below), or to be too high, resulting in the post-transaction company not meeting the minimum Publicly-Held Shares requirement (discussed further below).
The NYSE American has privately advised that it is acceptable to set the exchange ratio based on the last closing price of the pre-transaction public company’s stock on the day prior to the anticipated closing date of the reverse merger. The intent of this approach is to minimize the time in which volatile swings in price can occur that may cause the final exchange ratio to overshoot or undershoot the target listing price, while allowing for the pre-transaction public company to meet related prior disclosure, notice, and administrative requirements relating to the implementation of the exchange ratio on the date of closing.
To use this approach, the proxy statement/prospectus for the transaction should disclose that the final exchange ratio will be announced in a Form 8-K (or Form 6-K) or press release after the shareholder meeting and on the last trading day prior to the anticipated closing date. The pre-transaction public company must separately announce its intention to set the final exchange ratio based on the price of its stock at the close of trading on the trading day prior to the anticipated closing date approximately five or more business days before the anticipated closing date. The company must then announce the final exchange ratio immediately after it has been set on the last trading day before the anticipated closing date. Immediately after the public company announces the exchange ratio, it must also give notice to NYSE American, and provide its transfer agent with the final exchange ratio along with the post-closing number of shares that each registered shareholder will hold or be entitled to immediately following the transaction.
As of March 27, 2026, the minimum stock price for all NYSE American listings has been increased to $4.00 per share. Previously, as we discussed in our earlier post, the NYSE American minimum bid price requirement was $3.00 per share, or $2.00 if other heightened listing requirements were met. This increase is a significant development that companies must factor into their exchange ratio formula.
In addition, NYSE American staff has privately advised that if an exchange ratio is to be used to meet the minimum stock price, the ratio should be set high enough to cause the stock price to be well above the minimum on the listing date, but also low enough to ensure that the number of the post-transaction public company’s post-closing shares meets the requirement to have a minimum of 500,000 Publicly-Held Shares together with a minimum of 800 Public Shareholders, or a minimum of 1,000,000 Publicly-Held Shares together with a minimum of 400 Public Shareholders.6 “Publicly-Held Shares” are defined as shares not held directly or indirectly by an officer, director, or any person who is the beneficial owner of more than 10 percent of the total shares outstanding, with determinations of beneficial ownership made in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended.7 Generally, the exchange ratio must be set so as not to reduce the number of Publicly-Held Shares below the 500,000 or 1,000,000 minimum, as applicable. “Public Shareholders,” as indicated by a footnote to Section 102(a) of the Company Guide, include “both shareholders of record [i.e., shareholders named on stock certificates or the electronic book-entry records of the transfer agent] and beneficial holders [i.e., shareholders holding shares through brokers, which include the vast majority of individual and institutional shareholders], but include only Publicly-Held Shares as defined in Section 101 for purposes of calculations.”8
It should be noted that unlike Nasdaq and NYSE (big board) initial listing requirements, NYSE American does not require a minimum number of round lot holders, other than in exceptional circumstances. In other words, the Public Shareholders requirement can be satisfied by having at least 400 or 800 retail and institutional shareholders, each of whom owns at least a single post-closing share and is not an officer, director, or 10% beneficial owner. When setting the exchange ratio, the parties should generally round up the ratio for fractional shares to ensure that there is a sufficient number of Public Shareholders.
The business combination agreement or equivalent agreement should also include a provision allowing one of the parties, typically the party representing the post-transaction public company, to designate the exchange ratio formula in a manner consistent with the procedures described above, as long as it does not affect the relative consideration to be received by each party and their shareholders or other equity owners.
Meeting the Public Float Requirement
As of March 27, 2026, NYSE American requires that any listing company have a minimum “Aggregate Market Value of Unrestricted Publicly Held Shares” of $15,000,000 under Listing Standards 1, 2, and 3, or $20,000,000 under Listing Standard 4.9 This post also refers to this requirement as the “public float” requirement. Previously, the requirement could be met by having a market value of publicly-held shares as low as $3,000,000 under Listing Standard 1.10
For a reverse merger, NYSE American staff have privately indicated that they will generally assume that the market price of the pre-transaction public company’s listed stock at any time after the announcement of the merger fully reflects the market’s valuation of the post-transaction public company. NYSE American staff will not accept a pro forma valuation for purposes of determining whether the post-transaction public company will meet its minimum public float requirement. Notably, the NYSE American staff has privately indicated that it will not accept requests to adjust for the market’s tendency to discount the value of the combined company until shortly prior to the transaction’s announced closing date.
Whether the public float requirement is met will in practice be determined by multiplying the pre-transaction public company’s stock price by the number of expected “Unrestricted Publicly-Held Shares” (as defined in Section 101 of the NYSE American LLC Company Guide) of the post-transaction public company on the date of listing.
NYSE American defines “Unrestricted Publicly Held Shares” the same way as Nasdaq: Shares that are not “Restricted Securities,” which are shares “that are subject to resale restrictions for any reason, including, but not limited to, securities: (1) acquired directly or indirectly from the issuer or an affiliate of the issuer in unregistered offerings such as private placements or Regulation D offerings; (2) acquired through an employee stock benefit plan or as compensation for professional services; (3) acquired in reliance on Regulation S, which cannot be resold within the United States; (4) subject to a lockup agreement or a similar contractual restriction; or (5) considered ‘restricted securities’ under Rule 144 [under the Securities Act of 1933, as amended.”11 Therefore, shares that count toward this requirement may only include shares that will not be directly or indirectly beneficially owned by the post-transaction public company’s directors, officers, or 10% beneficial owners, are expressly registered on the registration statement for the related business combination offering (assuming that one is being used for the relevant reverse merger structure), and are not subject to any lock-up restrictions post-closing.
NYSE American has privately indicated that it will typically first assess these standards after reviewing the initial Form S-4, F-4, preliminary proxy statement, or other applicable pre-transaction SEC filing disclosing the planned transaction, particularly the section disclosing the anticipated beneficial ownership of the post-transaction public company immediately following the reverse merger. The exchange will comment on whether it needs clarification or whether the company is unable to meet the standard without restructuring its expected post-transaction ownership to increase the expected number of shares in the public float. If restructuring is required, the parties should confirm with NYSE American staff that their planned approach is acceptable. NYSE American staff have privately indicated that they will defer to the parties as to whether the methods used to change the proposed post-transaction beneficial ownership would be in accordance with SEC beneficial ownership and other applicable SEC rules and interpretations.
Obtaining Shareholder Approval
As we discussed in our previous post, the pre-transaction public company will typically be required to obtain shareholder approval in most reverse mergers because, under stock exchange rules, shareholder approval is required prior to an issuance of securities in connection with a change of control or an offering that exceeds 19.99% of pre-issuance outstanding shares.12 In practice, however, the pre-transaction public company’s management may no longer hold a majority of the company’s common stock, or even a substantial percentage, and the public shareholder base may be highly diffuse.
An important relevant recent development is that NYSE American has privately advised that it will no longer allow “super-voting” preferred stock to be used to gain shareholder approval of any proposals for any purpose, including approval of a reverse merger and any other needed proposals prior to the closing. Formerly, NYSE American-listed companies were allowed, at least under some circumstances, to designate and issue such preferred stock in connection with the vote on a contemplated corporate action. It has typically been designed to vote together with common stock in the same proportion as votes cast by common shareholders, except that each super-voting preferred share would have many votes, in effect amplifying the voting power of the shareholders who vote in person or by proxy at the meeting, and allowing their votes alone to meet required voting thresholds. It should be noted that this guidance does not affect the use of pre-existing dual-class voting structures in which one class of stock has a larger number of votes per share than the other class of stock.
The pre-transaction public company’s options to better assure a majority approval are therefore limited to restructuring its equity base using either a private placement or a public offering. However, NYSE American LLC Company Guide Section 713 will prevent the pre-transaction public company from issuing more than 19.99% of its outstanding shares, or securities convertible into more than 19.99% of its outstanding shares, in a private placement at less than the Minimum Price, which is defined as “a price that is 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.”13 The 19.99% cap may not be high enough to allow the company to issue enough new shares to supportive shareholders to have the 50.1% support needed to gain shareholder approval, and investor interest at or above the Minimum Price may be too low to allow a private placement to exceed the 19.99% cap.
One commonly used solution is for the pre-transaction public company to conduct a public offering, which is not subject to Section 713’s 19.99% cap. In such an offering, a relatively limited number of institutional investors purchase the vast majority of the shares, and a larger number of retail investors participate, though at a much lower level, to help meet NYSE American’s test for whether an offering constitutes a public offering. It should be noted that NYSE American requires minimum ten-day notice of the record date for a shareholder meeting.14 The shareholders as of the record date will be the shareholders entitled to vote at the meeting. For this or other reasons, the transaction may also involve “exploding warrants” that are set to “explode,” i.e., automatically be exercised for a significant number of shares, on a certain date, in order to better control the timing for when the institutional investors will hold a majority position. The record date for the pre-transaction public company’s shareholder meeting can then be set for that date such that the institutional investors will have a majority position on the record date as a result of the automatic exercise of the warrants. Under these circumstances, the institutional investors will then constitute a majority of the shareholders entitled to vote at the meeting, and may vote at the meeting and pass the required proposals to allow the reverse merger to proceed.
However, the offering price for the offering must be set high enough, and the volume of new shares in the offering must not be so high, that it causes the stock price to fall below the minimum price level allowed by the stock exchange, prompting delisting proceedings prior to closing. It should be noted that NYSE American has filed a rule proposal to amend Section 1003(f)(v) of the Company Guide to require that any listed stock’s closing price per share of less than $0.25 trigger immediate suspension from trading and commencement of delisting proceedings, on or after October 1, 2026.15 Pending the effectiveness of this rule change, NYSE American staff have privately advised that NYSE American can commence delisting proceedings and immediately suspend trading in the event that a listed company’s common stock trades at levels viewed to be abnormally low and no longer suitable for listing. NYSE American generally views trading below a price of $0.10 to be abnormally low and therefore subject to immediate suspension from trading and commencement of delisting proceedings under Company Guide Section 1003(f)(v).
Addressing Pre-Closing Liabilities, Including NYSE American Listing Fees
The parties must address all of the pre-transaction public company’s pre-closing liabilities, including NYSE American listing fees. Naturally, the private company will generally require that the pre-transaction public company pay or otherwise eliminate pre-closing liabilities prior to closing.
One of the largest such liabilities may be unpaid accrued NYSE American listing fees. For NYSE American-listed companies whose only listed security is common stock, annual listing fees were increased to $65,000 (if they had 50,000,000 shares outstanding or less) and $84,000 (if they had more than 50,000,000 shares outstanding) as of January 1, 2026.16 NYSE American also applies additional listing fees of $0.02 per share issued, up to $65,000 per year.17 For microcap NYSE American-listed companies, the maximum additional listing fees can easily reach $65,000 due to their constant use of capital markets financings through substantial sales of shares. Many struggling microcap public companies may be delinquent on their NYSE American listing fees, which will need to be fully paid up prior to the effectiveness of the reverse merger.
NYSE American will also require the post-transaction public company to pay a $75,000 original listing fee, effective January 1, 2026,18 plus an annual listing fee of $65,000 or $84,000 (as described above), which is pro-rated for the first calendar year.19
A special consideration relating to NYSE American annual listing fees applies to a reverse merger structure where the pre-transaction public company will not continue to be the entity whose shares are traded on the exchange. If the reverse merger is structured as an acquisition of the pre-transaction public company entity by the private company or the private company’s parent company, then, technically, both the pre-transaction public company and the post-transaction public company would owe annual listing fees for the calendar year in which the transaction occurs. Section 141 of the Company Guide, which addresses annual fees, only provides for pro rating of annual fees for the first calendar year of the post-transaction listed company’s listing, not the last year’s annual fees for the pre-transaction public company. The NYSE American staff has recently confirmed that it will, on a case-by-case basis, waive the pro rata portion of the annual fees for the pre-transaction public company relating to the portion of the year after the date of the reverse merger. However, such treatment is not automatic, and therefore must be requested and advocated for by the pre-transaction public company.
Generally, the pre-transaction public company will need to use any available methods to address these and other pre-closing liabilities, including equity financings. However, such financings may themselves cause dilution and risk causing the pre-transaction public company’s stock price to fall below the minimum needed to have an acceptable exchange ratio, or below the minimum stock price required for the pre-transaction public company’s stock to continue trading pending the closing of the reverse merger,20 and may generate substantial legal, accounting, SEC registration, and other fees and expenses, including NYSE American additional listing fees.
As such, the parties will need to fully understand each other’s current and expected liabilities at the time of closing, including the amount of liabilities for NYSE American listing fees, and coordinate and plan with each other and their legal advisors, financial advisors, and accountants on any equity financings and other approaches to address transaction expenses. The parties should also negotiate a reasonable balance of allocations from the anticipated financings based on their best estimates of the anticipated amounts of each party’s liabilities going into closing, and revisit and amend this allocation periodically as needed if the timeline of the transaction changes significantly or another material event occurs that significantly changes anticipated total transaction-related expenses or other pre-transaction liabilities. The business combination agreement or equivalent agreement should include relevant provisions and such provisions should be amended as necessary in accordance with any needed changes to anticipated pre-closing liabilities.
Conclusion
The NYSE American listing process for reverse mergers between struggling microcap operating listed companies and private companies seeking to become public includes a complex interplay of minimum stock price, public float, and shareholder approval requirements, and pre-closing liability management. Recent NYSE American rule amendments – including the increase in the minimum stock price to $4.00 per share and the increase in the minimum public float to $15,000,000 – together with private staff guidance, such as the prohibition on super-voting preferred stock for shareholder approval purposes, have materially raised the bar for microcap companies pursuing reverse mergers on the NYSE American. On the other hand, the recent NYSE American rule amendment requiring initial public offerings to have a minimum $15,000,000 raise further closes the window for initial public offerings, meaning reverse mergers are arguably more important than before as a potentially more feasible alternative for private companies seeking to gain access to U.S. capital markets. Along with these developments, the private NYSE American guidance described in this post can help provide guidance in navigating the reverse merger listing process for NYSE American reverse merger listings. Companies and their advisors must carefully navigate these requirements from the earliest stages of the transaction to ensure that they can satisfy the exchange’s listing requirements at closing.
Footnotes
1. Defined as shares that are “Publicly-Held Shares” (see “Meeting the Minimum Bid Price Requirement Through an Exchange Ratio” below) and that are “Unrestricted Securities” (see “Meeting the Public Float Requirement” below). See Section 101 of the Company Guide.
2. Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, to Amend the Initial Listing Standards Set Forth in Sections 101 and 102 of the NYSE American Company Guide, available at https://www.sec.gov/files/rules/sro/nyseamer/2026/34-105105.pdf.
3. Section 101(e) of the Company Guide.
4. Section 1003(f)(vi) of the Company Guide.
5. Section 1003(f)(vii) of the Company Guide.
6. See Sections 101 and 102(a) of the Company Guide.
7. Section 101 of the Company Guide.
8. Section 101 of the Company Guide.
9. Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, to Amend the Initial Listing Standards Set Forth in Sections 101 and 102 of the NYSE American Company Guide, available at https://www.sec.gov/files/rules/sro/nyseamer/2026/34-105105.pdf.
10. Id. at 4.
11. Section 101 of the Company Guide.
12. See Section 713 of the Company Guide.
13. Id.
14. See Section 502 of the Company Guide.
15. See Notice of Filing of Proposed Change to Amend Section 1003 of the NYSE American Company Guide
(available at https://www.sec.gov/files/rules/sro/nyseamer/2026/34-105036.pdf).
16. See Section 141 of the Company Guide.
17. See Section 142 of the Company Guide.
18. See Section 140 of the Company Guide.
19. See Section 141 of the Company Guide.
20. See discussion above relating to NYSE American’s proposed and current requirements as to the minimum stock price for listed companies.
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