The New York Stock Exchange filed a proposed rule change with the Securities and Exchange Commission on January 29, 2026, to amend Section 102.01F of its Listed Company Manual. This modification would exclude certain de-SPAC transactions from the definition of a reverse merger, allowing companies formed through these deals to list more readily on the exchange. Published in the Federal Register on February 12, 2026, the proposal responds to evolving market practices and recent SEC regulations that treat de-SPAC transactions as akin to initial public offerings. By aligning listing requirements for over-the-counter SPACs with those for listed ones, the change could streamline access to public markets for entities completing business combinations, provided they meet rigorous disclosure standards. This development highlights ongoing efforts to balance innovation in capital formation with investor safeguards in the post-SPAC boom era.
Background on Reverse Mergers and SPACs
Section 102.01F of the NYSE Listed Company Manual currently defines a reverse merger as a transaction where an operating company becomes a reporting entity under the Securities Exchange Act by combining with a shell company. Such deals trigger additional listing hurdles, including a requirement that the combined entity has traded over-the-counter or on another exchange for at least one year post-merger, maintained a $4 closing price for 30 of the most recent 60 trading days, and filed all required SEC reports, including audited financials for a full fiscal year. These conditions, known as the Reverse Merger Requirement, were established to prevent 'backdoor registrations' where companies access public markets without the scrutiny typical of traditional IPOs.
Special purpose acquisition companies, or SPACs, are shell entities formed to raise capital through an IPO and later merge with a private operating company in a de-SPAC transaction. Under existing rules, de-SPAC deals by NYSE-listed SPACs are already exempt from the reverse merger definition, as the exchange lists these vehicles knowing they intend to pursue such combinations. However, SPACs that delist and trade over-the-counter face different treatment, potentially subjecting their de-SPAC transactions to the full Reverse Merger Requirement. The proposal seeks to extend the exemption to these OTC SPACs if they were previously listed on a national exchange and the post-transaction entity lists in connection with an effective registration statement under the Securities Act of 1933.
This adjustment draws on definitions from recent SEC rules. A SPAC is defined in Item 1601(b) of Regulation S-K as a company whose business plan involves raising funds not subject to Rule 419, completing a business combination within a specified timeframe, and returning proceeds if unsuccessful. A de-SPAC transaction, per Item 1601(a), is a business combination involving a SPAC and one or more targets.
Key Elements of the Proposed Rule Change
The NYSE's filing emphasizes that de-SPAC transactions differ from traditional reverse mergers because they function as the equivalent of an IPO for the target company. As noted in the SEC's January 2024 SPAC Release (Release No. 99418), these deals provide private targets access to public markets and cash proceeds, much like an IPO, but are structured as mergers. The SEC's rules mandate enhanced disclosures for SPAC IPOs and de-SPAC transactions, aligning their obligations with those of traditional public offerings.
Under the proposal, the reverse merger exclusion would apply to de-SPAC transactions involving SPACs previously listed on a national exchange, even if now trading OTC, provided public shareholders can redeem shares for a pro rata portion of IPO proceeds and the listing occurs with an effective 1933 Act registration statement. This mirrors the existing exemption for listed SPACs and the rule's carve-out for companies listing via a firm commitment underwritten offering of at least $40 million. The NYSE argues this ensures investor protections through SEC review and disclosure, allowing shareholders to make informed decisions on redemption.
The proposal also addresses structural variations. For instance, if the operating company survives the merger instead of the SPAC, the transaction avoids reverse merger scrutiny as a new registrant. By extending the exclusion, the NYSE aims to harmonize treatment across deal structures.
Statutory Basis and Investor Protections
In justifying the change, the NYSE cites Section 6(b)(5) of the Securities Exchange Act, which requires rules to promote just and equitable trade principles, remove market impediments, and protect investors. The exchange contends that applying reverse merger rules to these de-SPAC deals creates unnecessary barriers, given their IPO-like nature and the safeguards in place. SPACs listed on national exchanges typically deposit at least 90% of IPO proceeds in trust, offering redemption rights that persist even after delisting to OTC markets.
Comparisons to other exchanges bolster the case. Nasdaq adopted a similar rule in December 2025 (Release No. 104344), excluding comparable de-SPAC transactions. NYSE American's rules also exempt acquisitions by listed acquisition companies. The NYSE asserts that without this change, OTC SPACs face discriminatory hurdles, potentially stifling competition.
Perspectives vary on the implications. Proponents view it as modernizing listing standards to reflect SEC guidance, facilitating capital access without compromising oversight. Critics might argue it could encourage more SPAC activity, recalling past concerns over SPAC performance and dilution. However, the requirement for an effective registration statement subjects deals to SEC scrutiny, mitigating risks of inadequate disclosure.
Potential Implications and Broader Context
Short-term effects could include increased de-SPAC listings on the NYSE, as OTC SPACs gain parity with listed counterparts. Long-term, this may influence SPAC market dynamics, especially post the 2024 SEC rules that heightened disclosure and liability standards. Legal precedents, such as the SEC's treatment of de-SPAC as functional IPOs, underscore the shift away from viewing these as mere mergers.
The proposal became effective immediately upon filing under Section 19(b)(3)(A) of the Act, with a 60-day window for SEC suspension. It reflects broader regulatory adaptation to alternative listing paths, balancing innovation with protection.
In summary, this rule change addresses a regulatory gap, promoting consistency in how de-SPAC transactions are treated. Future challenges may involve monitoring compliance with redemption rights and registration requirements, while ongoing debates center on whether such exclusions adequately safeguard investors in evolving markets.
