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Nasdaq Capital Market

NASDAQ Finalizes Amendments To Accelerate Delisting Process

On January 17, 2025 the SEC approved Nasdaq’s rule change 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.  The final rule was passed as last submitted by Nasdaq, though in between the SEC required substantial additional analysis delaying the process on 3 occassions.

These rule changes follow other recent rule changes meant to reduce the number of ultra micro-cap companies trading on the national exchange and tighten up compliance for those that do meet the standards.  In October 2024, Nasdaq amended Rule 5810(c)(3)(A) to allow 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

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February 11, 2025

Market Wrap Up – November and December 2024

As promised, I am going to provide regular market wrap-ups for the IPO market as we move forward with the next administration and chapter for our U.S. capital markets.  This edition covers November and December 2024.  For a review of the Market Wrap-Up for October 2024 see HERE.

Nine small cap ($30,000,000 and under) IPOs priced in November 2024 and 12 in December 2024 (compared to 19 in October; 12 in September; 8 in August; 8 in July; 3 in June; 5 in May; 12 in April; 6 in March; 6 in February; and 8 in January). Below is a chart of relevant deal information for the November and December IPOs. In October I only included deals up to $25,000,000 but raised the cap to $30,000,000.  Normally, I would include all deals under $50,000,000 in this category, but the deal sizes remain very low.  As deal sizes return to pre 2022 normal levels, I will continue to

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January 28, 2025

NASDAQ Proposes Amendment To Liquidity Listing Standard

On December 12, 2024, Nasdaq proposed an amendment to its liquidity listing standards for the Nasdaq Capital Market and Nasdaq Global Market such that the market value of unrestricted publicly held shares requirement could only be satisfied from the proceeds of the initial public offering.  That is, Nasdaq would no longer count shares registered for re-sale by existing shareholders towards satisfying this listing standard.  Nasdaq is also proposing to make similar changes affecting companies the uplist onto the Nasdaq from OTC Markets.

To list its securities on Nasdaq Capital Market or Nasdaq Global Market, a company is required to meet: (a) certain initial quantitative and qualitative requirements and (b) certain continuing quantitative and qualitative requirements.  The quantitative listing thresholds for initial listing are generally higher than for continued listing, thus helping to ensure that companies have reached a sufficient level of maturity prior to listing.  NASDAQ also requires listed companies to meet stringent corporate governance standards.

Listing

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January 14, 2025

Market Wrap-Up

For the first time since December 2022, the markets are seeing an uptick in completed small cap initial public offerings (IPOs).  My clients are always asking me about the deals that are getting done, which prompted this blog, the first in what will be regular periodic market roundups.

Nineteen small cap (under $25,000,000) IPOs priced in October compared to 12 in September; 8 in August; 8 in July; 3 in June; 5 in May; 12 in April; 6 in March; 6 in February; and 8 in January.  Below is a chart of relevant deal information for the 19 October IPOs.    Normally, I would include all deals under $50,000,000 in this category, but the deal sizes remain very low.  As deal sizes return to pre 2022 normal levels, I will adjust by market recaps upward accordingly.

Exchange Offer Amount Domestic/Foreign Issuer Banker(s)
Nasdaq Capital $4,199,995 Foreign Aegis Capital Corp.
Nasdaq Capital $5,200,000 Foreign The Benchmark Company
Nasdaq Capital $7,000,000
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November 12, 2024

NASDAQ Amends Rule 5210 – Listing Prerequisites

In March 2024, the Nasdaq Stock Market quietly 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.  The new rules also created the “limited underwriting member” class and accompanying rules applicable to the group and its associates including eligibility, application process and ongoing requirements.  Although the amendment garnered little attention at the time, now that it has become effective, it is loudly impacting the small cap IPO market.

Rule 5210 – Background

Nasdaq Rule 5210 sets forth the prerequisites for a company to apply for a Nasdaq listing.  Until October 2023, the Rule had 12 subparts with new Rule 5210(l) being added in October 2023 and new Rule 5210(m) being added in March 2024.  Rule 5210(l) requires that any company listing on Nasdaq comply with the recovery of erroneously awarded compensation (Clawback) rules.  For more on the Clawback rules see HERE. 

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August 20, 2024

Nasdaq Adopts New Reverse Split Rule Change

On November 1, 2023, the SEC approved Nasdaq’s rule changes to the notification and disclosure requirements for reverse splits.  The new rules went effective immediately upon approval.  For the proposed rule changes see HERE.

Background

After the market highs of the second half of 2020 and all of 2021, we have all witnessed the general decline, including noticeably depressed valuations and market price, especially in the small cap space.  In 2022, Nasdaq processed 196 reverse stock splits, compared to 31 in 2021 and 94 in 2020. As of June 23, 2023, Nasdaq has processed 164 reverse stock splits, and projects significantly more throughout 2023. The majority of reverse splits are completed by companies that trade on the Nasdaq Capital Market tier of the exchange and are completing the split to maintain the minimum $1.00 bid price to avoid delisting.

In response to concerns by Nasdaq that market participants do not have enough visibility on these companies or their

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December 12, 2023

Nasdaq Listing Deficiencies And Delisting – Part 3

As 2022 and 2023 have continued to be extremely tough years for the capital markets many small cap companies find themselves failing to maintain the minimum continued listing requirements.  I’ve recently written about those continued listing requirements, see HERE, and Nasdaq’s proposed rule changes for reverse split notifications as companies struggle to maintain the $1.00 minimum bid price requirement, see HERE.

These blogs provide a perfect segue for a deep dive into the Nasdaq deficiency notice and delisting process.  In this first blog in the series, I provided an overview of deficiencies, deficiency notices, cure periods and compliance plans – see HERE.  In Part 2, I reviewed the hearing panel process – see HERE.  In this Part 3, I will review the appeals to the Nasdaq Listing and Hearing Review Council and delisting.  I note that the Nasdaq rules also contain administrative rules regarding the conduct of adjudicators and advisors and the adjudication process, which

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November 7, 2023

Nasdaq Listing Deficiencies And Delisting– Part 2

As 2022 and 2023 have continued to be extremely tough years for the capital markets many small cap companies find themselves failing to maintain the minimum continued listing requirements.  I’ve recently written about those continued listing requirements, see HERE, and Nasdaq’s proposed rule changes for reverse split notifications as companies struggle to maintain the $1.00 minimum bid price requirement, see HERE.

These blogs provide a perfect segue for a deep dive into the Nasdaq deficiency notice and delisting process.  In this first blog in the series, I provided an overview of deficiencies, deficiency notices, cure periods and compliance plans – see HERE.  In this Part 2, I will review the hearing panel process followed by appeals and ultimately delisting.

Review of Deficiency Determinations by Hearing Panel

As noted in Part 1 of this series, Nasdaq deficiency notifications are one of four types:

  • Staff delisting determinations, which are notifications of deficiencies that, unless appealed, subject the Company to
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October 31, 2023

Nasdaq Listing Deficiencies And Delisting – Part 1

As 2022 and 2023 have continued to be extremely tough years for the capital markets, many small-cap companies find themselves failing to maintain the minimum continued listing requirements.  I’ve recently written about those continued listing requirements – see HERE – and Nasdaq’s proposed rule changes for reverse split notifications as companies struggle to maintain the $1.00 minimum bid price requirement – see HERE.

These blogs provide a perfect segue for a deep dive into the Nasdaq deficiency notice and delisting process.  In this first blog in the series, I provide an overview of deficiencies, deficiency notices, cure periods and compliance plans.  In the Part 2, I will review the hearing panel process followed by appeals and ultimately delisting.

Overview – Deficiency Notices

When the Nasdaq Listing Qualifications Department determines that a company does not meet a listing standard, it will immediately notify the company of the deficiency.  The notification will come in letter format, literally within a day

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October 24, 2023

NASDAQ Continued Listing Requirements

Although I often write about initial listing standards, I realized that I have not yet blogged about the reduced ongoing listing standards for national exchanges.  In this blog, I will cover the continued listing requirements for Nasdaq listed companies and in next week’s blog I will cover the NYSE/NYSE MKT. For a review of initial listing requirements for the Nasdaq Capital Markets and NYSE MKT see HERE.

Nasdaq Capital Markets

To continue listing on Nasdaq Capital Markets, a company is required to meet certain ongoing quantitative and qualitative requirements.  NASDAQ also requires listed companies to meet stringent corporate governance standards.

In order to continue listing on Nasdaq Capital Markets a company must meet all of the following requirements: (i) at least 2 market makers; (ii) a $1 minimum bid price; (iii) at least 300 unrestricted round lot public shareholders; (iv) at least 500,000 publicly held shares; and (v) a market value of publicly held shares of at least $1

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October 3, 2023

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