On October 7, 2026, the SEC published notice of immediate effectiveness of Nasdaq’s proposed modified Listing Rule 5505. The amendment eliminates the alternative price framework that allowed companies to list on the Capital Market tier at share values between $2.00 and $4.00. As a result, all corporate applicants seeking initial listing must now satisfy a uniform, non-negotiable $4.00 minimum bid price.
This action represents another step in a continuous campaign by the exchange to elevate entry criteria and remove low-priced securities from public circulation. I’ve included an updated tally of recent Nasdaq rule changes affecting listing and continued listing eligibility at the end of this blog.
The Demise of the Alternative Price Requirement
Historically, Listing Rule 5505(a)(1)(B) provided a flexible pathway for emerging businesses seeking a national quotation. Under this provision, an applicant could qualify with an initial bid price between $2.00 and $4.00, provided the security satisfied an exclusion from statutory penny stock status under Exchange Act Rule 3a51-1(g). To utilize this alternative route, the issuer had to demonstrate one of three financial tests:
- Net tangible assets exceeding $2 million for entities with at least three years of continuous operation;
- Stockholders’ equity or net assets surpassing $5 million for enterprises operating for under three years; or
- Average annual revenue reaching at least $6 million over the prior three fiscal periods.
Under the new rule, Nasdaq has completely deleted Listing Rule 5505(a)(1)(B). Going forward, every applicant listing common equity on the Capital Market tier must demonstrate a closing bid price of at least $4.00 per share.
Regulatory Rationale and Inter-Market Alignment
Nasdaq initially enacted the alternative price provision in 2012 to compete directly with NYSE American, which was previously the only other national platform permitted to list sub-$4.00 securities. However, on March 27, 2026, the SEC approved an NYSE American rule filing that abolished its own sub-$4.00 entry threshold (see HERE). Once NYSE American withdrew that provision, the competitive basis for Nasdaq’s alternative rule evaporated.
Beyond inter-market alignment, Nasdaq emphasized regulatory integrity considerations under Section 6(b)(5) of the Exchange Act. The Exchange noted that equities entering public trading at lower valuations experience heightened volatility and vulnerability to manipulative market schemes. By establishing a strict $4.00 floor, regulators aim to ensure that newly admitted equities possess greater institutional credibility and liquidity depth.
Treatment of Grandfathered Companies and IM-5505-2 Monitoring
Nasdaq is maintaining Listing Rule IM-5505-2 to govern grandfathered issuers. Under this interpretive material, the exchange actively monitors listed entities that originally qualified below $4.00. If an issuer ceases to satisfy the net tangible assets or revenue criteria of former Listing Rule 5505(a)(1)(B) while lacking any other penny stock exclusion under Exchange Act Regulation 3a51-1, Nasdaq publishes its identity on a public website list. The platform will continue publishing this roster for as long as any covered company remains listed.
However, grandfathered issuers possess a permanent exit mechanism. Pursuant to IM-5505-2, if a company achieves a closing price of $4.00 or higher for five consecutive business days while satisfying all other initial listing benchmarks, it graduates permanently from the alternative designation.
Effective Date
The new $4.00 requirement becomes operative thirty days following the September 30, 2026 filing date, taking effect on October 30, 2026.
Relationship Partner Advisory: Structuring Compliant IPOs and Direct Listings
From my vantage point as a relationship partner advising boards, CFOs, and investment bankers, this amendment demands proactive pricing discipline. For small-cap enterprises planning public offerings, the era of discounted sub-$4.00 entry pricing has officially closed across all major American exchanges.
To execute upcoming transactions cleanly and compliantly, management teams should observe three practical directives:
First, audit in-flight offering structures immediately. If your syndicate planned an IPO or direct listing priced between two and four dollars, evaluate your transaction timetable. You must either price and close prior to the October 30, 2026 operative deadline or adjust terms to support a four-dollar valuation.
Second, evaluate pre-IPO reverse stock splits carefully. Companies seeking to raise share value to meet the $4.00 threshold must coordinate corporate actions with state law and exchange limits. Remember that Nasdaq heavily scrutinizes reverse splits that reduce round lot counts or create public float deficiencies under Rule 5101.
Third, maintain continuous penny stock compliance for grandfathered issuers. Companies listed under former Rule 5505(a)(1)(B) must diligently track quarterly balance sheets and revenues to avoid landing on Nasdaq’s public website list. Prioritize achieving five consecutive days at or above four dollars to permanently extinguish special monitoring under IM-5505-2.
Early planning with experienced securities counsel prevents costly delays, ensuring your transaction proceeds smoothly through exchange review.
Tally of Recent Nasdaq Listing Rule Changes
Updating my running tally of recent rule changes effecting listing and continued listing eligibility: (i) On July 22, 2026, Nasdaq adopted a hard $5 million Market Value of Listed Securities continued listing requirement, which remains stayed pending SEC review (see HERE); (ii) On June 3rd, 2026 Nasdaq enacted new IM-5101-4 which provides the Exchange with the authority to delist a security where the SEC has previously suspended trading in that security and Nasdaq determines it appropriate and in the public interest to do so (see HERE); (iii) In May 2026 Nasdaq adopted new Rule 5210(1)(i) adding additional listing criteria for companies primarily operating in China, including Hong Kong and Macau (see HERE) (iv) In December, 2025, Nasdaq adopted IM-5101-3 expanding discretionary power to deny initial applications based on past advisor conduct or susceptibility to manipulation (detailed HERE); (v) In December 2025, amended listing Rules 5405 and 5505 Nasdaq increased the initial listing requirements for companies seeking to list on the Nasdaq Capital Markets or Global Markets using the net income standard such that the minimum “Market Value of Unrestricted Publicly Held Shares” must be $15 million each (see HERE); (vi) In December 2025 Nasdaq modified Rule 5810 allowing it to immediately delist a company whose securities do not maintain a closing bid price of greater than $0.10 for 10 consecutive days (see HERE); (vii) In March 2025, Nasdaq amended Listing Rules 5405 and 5505 modifying the listing requirements for Nasdaq Capital Markets and Global Markets, such that a company listing in connection with an IPO, including a foreign private issuer registering ADRs, must satisfy the Market Value of Unrestricted Publicly Held Shares (MVUPHS) requirement for an initial listing solely with the proceeds of the offering (see HERE); (viii) In January 2025 Nasdaq adopted amendments to Rules 5810 and 5815 allowing it to accelerate the delisting process for companies that fail to regain compliance with the minimum bid price requirements following a second compliance period and for securities that have had a reverse stock split over the prior one-year period (see HERE); (ix) In October 2024, Nasdaq amended Rule 5810 to for an accelerated delisting process where a listed company uses a reverse split to regain compliance with the bid price requirement for continued listing, but that as a result of the reverse split, the company falls below other listing standards, such as the minimum number of round lot holders, or minimum number of shares in the publicly held float (see HERE; and (x) In March 2024, Nasdaq amended Rule 5210 requiring that all lead underwriters on an IPO must be Nasdaq members or limited underwriting members as a prerequisite to applying for a listing (see HERE).
The Author
Laura Anthony, Esq.
Founding Partner
Anthony, Linder & Cacomanolis
A Corporate and Securities Law Firm
Securities attorney Laura Anthony and her experienced legal team provide ongoing corporate counsel to small and mid-size private companies, public companies as well as private companies going public on the Nasdaq, NYSE American or over-the-counter market, such as the OTCQB and OTCQX. For more than two decades Anthony, Linder & Cacomanolis, PLLC has served clients providing fast, personalized, cutting-edge legal service. The firm’s reputation and relationships provide invaluable resources to clients including introductions to investment bankers, broker-dealers, institutional investors and other strategic alliances. The firm’s focus includes, but is not limited to, compliance with the Securities Act of 1933 offer sale and registration requirements, including private placement transactions under Regulation D and Regulation S and PIPE Transactions, securities token offerings and initial coin offerings, Regulation A/A+ offerings, as well as registration statements on Forms S-1, S-3, S-8 and merger registrations on Form S-4; compliance with the Securities Exchange Act of 1934, including registration on Form 10, reporting on Forms 10-Q, 10-K and 8-K, and 14C Information and 14A Proxy Statements; all forms of going public transactions; mergers and acquisitions including both reverse mergers and forward mergers; applications to and compliance with the corporate governance requirements of securities exchanges including Nasdaq and NYSE American; general corporate; and general contract and business transactions. Ms. Anthony and her firm represent both target and acquiring companies in merger and acquisition transactions, including the preparation of transaction documents such as merger agreements, share exchange agreements, stock purchase agreements, asset purchase agreements and reorganization agreements. The ALC legal team assists Pubcos in complying with the requirements of federal and state securities laws and SROs such as FINRA for 15c2-11 applications, corporate name changes, reverse and forward splits and changes of domicile. Ms. Anthony is also the author of SecuritiesLawBlog.com, the small-cap and middle market’s top source for industry news, and the producer and host of LawCast.com, Corporate Finance in Focus. In addition to many other major metropolitan areas, the firm currently represents clients in New York, Los Angeles, Miami, Boca Raton, West Palm Beach, Atlanta, Phoenix, Scottsdale, Charlotte, Cincinnati, Cleveland, Washington, D.C., Denver, Tampa, Detroit and Dallas.
Ms. Anthony is a member of various professional organizations including the Crowdfunding Professional Association (CfPA), Palm Beach County Bar Association, the Florida Bar Association, the American Bar Association and the ABA committees on Federal Securities Regulations and Private Equity and Venture Capital. She is a supporter of several community charities including the American Red Cross for Palm Beach and Martin Counties, Susan Komen Foundation, Opportunity, Inc., New Hope Charities, the Society of the Four Arts, the Norton Museum of Art, Palm Beach County Zoo Society, the Kravis Center for the Performing Arts and several others.
Ms. Anthony is an honors graduate from Florida State University College of Law and has been practicing law since 1993.
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