Nasdaq Alternative Listing Requirements

[Home Icon][What's New Icon][Products Icon][Feedback Icon][Search Icon]

New Nasdaq $2 / $3 Initial Price Listing Standards

The SEC has approved alternatives to Nasdaq's historical $4 minimum bid price listing standard.  Under the new alternative listing standards, a security may qualify for listing on the Nasdaq Capital Market if: 

In addition, the issuer must also demonstrate that it has:

Nasdaq-listed securities have historically not been regulated as "penny stocks" (which subject broker-dealers trading in them to additional disclosure and other requirements) because of the exception for securities registered on a national securities exchange that, among other things, required a minimum bid price of $4 per share at initial listing.  NYSE Amex benefits from a "grandfather" exception that permits lower initial prices.  With Nasdaq's new alternative listing standards, it can compete with the NYSE Amex for listings in the $2-3 range.  However, it is possible that companies listing under these lower standards may become "penny stocks."
To address this, new Nasdaq interpretive guidance (IM-5505) provides that an issuer listing under the alternative price requirements may become a "penny stock" if the issuer fails the net tangible assets and revenue tests after listing and does not satisfy any of the other exclusions from being a penny stock contained in Rule 3a51-1 under the Exchange Act.  Nasdaq will monitor issuers whose securities are listed under the alternative price requirement, and publish on its website on a daily basis a list of those companies that no longer satisfy the net tangible assets or revenue tests, nor any other exclusion from being a penny stock.  If a security subsequently has a $4 closing price for at least five consecutive business days, it can be reevaluated under the regular Nasdaq qualitative and quantitative initial listing standards and deemed listed under these standards.  Nasdaq has represented that its review of the issuer's compliance at this stage will be "robust" and "wholesale."  In addition, Nasdaq has represented that enhanced surveillance procedures will be used to monitor anomalous trading in securities listed under these alternatives.
With Nasdaq now competing with NYSE Amex for listings in the $2-3 range (and the relaxed registration requirements under the IPO "on-ramp" provisions of the JOBS Act), mid-sized IPO candidates have additional options for accessing the capital markets.