A Fair Exchange: NASDAQ Proposes New Venture Market

New listing requirements for proposed market would give more biotech companies option of going public
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The NASDAQ stock exchange is planning to establish a new BX Venture Market to help companies become publicly traded, a move that could greatly expand capital financing options for biotechnology startups.

According to a proposal submitted to the Securities and Exchange Commission in August 2010, NASDAQ’s proposed BX Venture Market would have reduced listing parameters for participation, creating an alternative for smaller companies and companies delisted from exchanges because they fell below minimum share or market value requirements.

“NASDAQ’s proposal to develop the new BX market will considerably expand financing opportunities for small companies,” said BIO President and CEO Jim Greenwood.

By easing participation rules, the new market would provide a securities exchange option for companies in need of financing that previously had been excluded. Many U.S. biotech companies would likely be eligible to participate in this new market, which would provide another avenue for attracting investors and financing.

“Expanding investor interest in biotech companies that do not meet current listing criteria is a move that will help a substantial number of biotech companies,” Greenwood said. 

Viable Market

The biosciences are the fastest growing industry segments in the United States. The sector currently employs more than 1.3 million people engaged in R&D for new therapies, medical devices, and improved agricultural products and practices, as well as production of alternative energy sources and biobased industrial products. 

Because of the costs and time required to bring biobased products to market, many of these the companies are desperately in need of financing from multiple sources. But because of their relatively small size, many of them also fail to meet the criteria for becoming publicly traded companies listed on national securities exchanges.

Becoming publicly traded would provide access to funding that could allow more companies to see their research through to completion and commercialization of new medical therapies and biobased products, a point that BIO made in comments submitted to the SEC in support of the proposed new market.

“Perhaps the greatest contribution the BX Venture Market will make is in assisting capital formation in public markets,” noted Alan F. Eisenberg, BIO’s executive vice president for emerging companies and business development, in the organization’s letter to the SEC. “The recent drop in the number of U.S.-listed companies on exchanges makes the need for capital formation especially acute. The BX market will offer investors a valuable source of liquidity, as well as provide for a more efficient allocation of capital.”

If the BX Venture Market is created, companies in the running for listings would be required to have a market value of $2 million, according to NASDAQ’s proposal. Additional requirements would include having been in operation for at least a year, a minimum bid price of $1 and 200,000 shares held by investors. 

The SEC is reviewing NASDAQ’s proposals and public comments and is expected to make a ruling shortly.

BIO visited the NASDAQ MarketSite in New York City's Times Square on Feb. 15, 2011, to conclude the 13th Annual BIO CEO & Investor Conference, the largest investor conference focused on publicly traded biotechnology companies. Greenwood, joined by numerous executives representing the life sciences industry, rang the Closing Bell.