In January we saw a proposed rule change for NASDAQ listing standards.  After a short delay in approval these changes are now official and will be in place for all new listings post April 11^th of this year.

What is the new NASDAQ Listing Rule?

The rule now changes the minimum market value of unrestricted publicly held shares.  The new rule would require that the minimum value of unrestricted free trading shares be met solely from proceeds of an offering.  This rule change also affects issuers uplisting from OTC with less than 2,000 shares / day volume (those who meet trade volume requirement can use the old standard).

In effect, this new rule sets minimum raise requirements for new issuers.  The minimum raise requirement will be dependent on the listing standard.  If a new issuer has net income over $750,000 either in the latest fiscal year or in two of the last three fiscal years, then the minimum raise will need to be $5 million.  For all other issuers the minimum raise would now be set at $15 million on NASDAQ Capital Markets.

Why has NASDAQ made this rule change?

Under the old rule, issuers can include shares of non-director and officers and less than 10% shareholders towards the minimum market value of unrestricted shares.  NASDAQ states that they have seen increased volatility for companies which are using these shareholders to meet the minimum market value requirements.  Due to the observed volatility for many of those issuers, NASDAQ has eliminated their ability to list without a larger raise at IPO/uplisting.

What does this mean?

This change means two things.

• A shift to NYSE from NASDAQ
• An overall increase in minimum fund raises on IPO

NASDAQ minimum listing standards are now more stringent than those of NYSE.  I expect that we will see a shift towards the NYSE’s listings.  NYSE will become the home for micro-caps while the current rules are in-place.  Using the NYSE standard still represents an increase in the required raise when compared to the old NASDAQ requirements ($5million NASDSAQ vs. now $10million at NYSE).

The new standards will require further steps towards listing for our clients.  As a result, the public listing process for small issuers is a little more complex.  In the current environment it is still likely the right path forward for the companies that were already contemplating listing under the old standards.

For more information or any questions, please contact:

Ian Hanna
Managing Director
[email protected]