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Nasdaq proposes changes to shareholder approval rule for large stock issuances

Nasdaq Inc. has filed a proposal to eliminate the requirement for shareholder approval of issuances at a price less than book value but greater than market value.

Nasdaq agreed with market participants that book value is not an appropriate measure of whether a transaction is dilutive or should otherwise require shareholder approval.

It proposed modifying the minimum price at which an issuance of 20% of a company's outstanding stock would not need shareholder approval from the closing bid price to the lower of the closing price or the average closing price of the common share as reflected on the exchange.

In an SEC filing, the market operator said allowing issuers to price transactions at the closing price rather than closing consolidated bid price will protect investors and the public interest because the closing price will represent an actual sale, which generally occurs at the same or greater price than the bid price.

Nasdaq noted that the closing price displayed on Nasdaq.com is the official closing price, which is derived from the closing auction on Nasdaq and reflects actual sale prices at one of the most liquid times of the trading day.

This would also allow companies and investors to price transactions in a manner designed to eliminate aberrant pricing resulting from unusual transactions on the day of a transaction, the exchange said.