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
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
NASDAQ Adopts New Listing Qualification Standards
Nasdaq has adopted new listing qualifications which were proposed in April 2019 (see HERE). The final rules were adopted with some modifications to prior proposals.
On July 5, 2019, the SEC approved a Nasdaq rule change to amend initial listing standards related to liquidity. For a review of the Nasdaq Capital Market’s current initial listing standards, see HERE and related to direct listings, see HERE. In particular, to help assure adequate liquidity for listed securities, Nasdaq revised its initial listing criteria to (i) exclude restricted securities from the Exchange’s calculations of a company’s publicly held shares, market value of publicly held shares and round lot holders; (ii) imposed a new requirement that at least 50% of a company’s round lot holders must each hold shares with a market value of at least $2,500; and (iii) adopt a new listing rule requiring a minimum average daily trading volume for OTC traded securities at the time of their listing.
On
