On July 15, 2024, the U.S. Securities and Exchange Commission (SEC) published a Nasdaq rule proposal that would amend its rules to significantly curtail the ability of its hearings panel to give special purpose acquisition companies (SPACs) more time to complete a business combination.  

Nasdaq rules require that a SPAC complete a business combination within 36 months of its initial public offering (IPO) or be delisted. However, the Nasdaq hearings panel had the ability to give SPACs additional time to complete a business combination (up to an additional six months, or up to an aggregate of 42 months from completion of the IPO). The Nasdaq hearings panel has used this discretion in recent years to give a number of SPACs additional time to complete a business combination.

Under the proposed new Listing Rule 5815(c)(1)(H), when the hearings panel review is of a delisting determination issued for failure to: (i) complete a business combination within 36 months of the SPAC's IPO; or (ii) meet the requirements for initial listing following the business combination, the hearings panel could only reverse a delisting decision where the delisting determination was in error and that the applicable requirements were met at the time of the delisting determination. In such cases, the Nasdaq hearings panel could not consider facts indicating that the company had regained compliance since the delisting determination, nor could the hearings panel grant an exception allowing the company additional time to regain compliance.

This new rule would effectively prevent companies from getting additional time to complete a business combination beyond 36 months. Companies should plan to complete business combinations within the 36 month period described in the rules or face delisting.