Frequently Asked Questions: Voluntary Delisting from NASDAQ and Planned Deregistration from the SEC

 

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"Delisting" refers to the withdrawal of an issuer's securities from trading on the relevant stock exchange (e.g., NASDAQ). "Deregistration" refers to the termination of the SEC registration of an issuer's securities, resulting in the termination of an issuer’s reporting obligations under the Exchange Act.

 

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Elron’s decision to delist from NASDAQ and deregister its ordinary shares under the Exchange Act was made after careful consideration by its Board of Directors of various factors, including the following:

1. Elron has a relatively limited number of U.S. holders of record and a substantial majority of the trading of Elron’s shares occurs on the Tel Aviv Stock Exchange ("TASE").
2. The high costs associated with being a reporting company under the U.S. securities laws, including costs arising from compliance with the provisions of the Sarbanes-Oxley Act of 2002 and the NASDAQ Listing Rules, the associated listing fees, increased costs of directors’ and officers’ insurance due to trading on the U.S. capital markets and increased U.S. legal and auditing fees.
3. The ordinary shares will continue to be listed and traded on the principal trading market—the TASE.
4. Elron will continue to make public reports with the Israeli Securities Authority and TASE in accordance with the Israeli securities laws and regulations.

 

No. Although the shares will not trade on NASDAQ, all shareholders (regardless of where their shares were traded) will remain entitled to hold their shares with the same voting and economic rights as before the delisting. The shares will not be cashed out as part of the delisting. See below under “How would the delisting affect the trading of Elron shares in the U.S. while it remains an SEC reporting company?”.

 

Although the shares will not trade on NASDAQ, there may continue to be inter-broker trading in the over-the-counter market (“OTC”) in the United States either on the OTC Bulletin Board (the "OTCBB") or in the so-called Pink Sheets. See below under “What is the OTCBB?” and “What are the Pink Sheets?”

 

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The OTCBB is a quotation medium for subscribing members, not an issuer listing service (only market makers can apply to quote securities on this service), and should not be confused with The NASDAQ Stock MarketSM. OTCBB securities are traded by a community of market makers that enter quotes and trade reports through a highly sophisticated closed computer network, which can be accessed through the NASDAQ Workstation. The OTCBB is unlike The NASDAQ Stock Market in that it:

1. does not impose listing standards;
2. does not provide automated trade executions;
3. does not maintain relationships with quoted issuers; and
4. does not have the same obligations for market makers.

A company's shares will no longer be eligible to be traded on the OTCBB once a company ceases reporting to the SEC. For more information concerning the OTCBB, see http://www.otcbb.com/.

 

 

The Pink Sheets is a centralized electronic quotation service for OTC securities.  It is not owned or operated by The NASDAQ Stock Market, Inc. or The Financial Industry Regulatory Authority (FINRA). Companies whose shares are traded in the Pink Sheets need not be SEC-reporting companies. For more information regarding the Pink Sheets, see http://www.pinksheets.com/pink/index.jsp.

 

A market maker is a brokerage house or a bank that publishes a price at which the market maker is willing to buy a given stock and the price at which it is willing to sell the same stock (referred to as the bid and ask prices). Market makers in a given OTC stock create a market by standing ready, willing and able to buy or sell at the publicly quoted prices.

 

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Yes.

 

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OTC share prices are typically publicly available and could be consulted at financial service providers' web sites, such as Yahoo Finance, Bloomberg, Reuters, etc.  OTTCBB prices can be found at http://www.otcbb.com/asp/watchlist.asp. Pink Sheets quotes can be found at http://www.pinksheets.com/pink/quote/search.jsp.  In addition, the Elron shares are traded on the TASE with the share price (in New Israeli Shekels) being made publicly known (http://www.tase.co.il/Tel Aviv Stock ExchangeEng/Homepage.htm).

 

 

No, your shares will not be automatically converted to trade on the TASE.  As described above, there may continue to be inter-broker trading in the OTC market in the United States either on the OTCBB or in the Pink Sheets. However, in case you wish to trade your shares on the TASE, you need to take the following steps: 

 

In the U.S., as long as Elron is registered with the SEC, Elron will continue to be subject to the reporting obligations under the Exchange Act, even after the delisting from Nasdaq. In Israel, Elron commenced reporting (in Hebrew) in accordance with the Israeli securities laws and regulations.

It should be noted that as a result of the delisting from NASDAQ, Elron has changed its financial reporting principles from U.S. generally accepted accounting principles ("U.S. GAAP") to the International Financial Reporting Standards ("IFRS"). As permitted under the Exchange Act and the regulations promulgated thereunder, Elron's financial statements submitted to the SEC are prepared in accordance with IFRS (without reconciliation to US GAAP).

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Once Elron ceases to be an SEC reporting company, Elron's shares will not be eligible to be traded on the OTCBB. However, trading may still take place in the U.S., such as through the Pink Sheets.