Nasdaq Listing Requirements: A Step-by-Step Guide

What are Nasdaq Listing Requirements?

The Nasdaq Stock Market is one of the largest and most well-known stock exchanges in the world. It plays a crucial role in the stock market by providing a platform for companies to raise capital and for investors to buy and sell shares. Nasdaq is famous for its electronic trading and its focus on technology and biotech companies.

Nasdaq has three main tiers:

1. Global Select Market: The top tier with the most stringent listing requirements.
2. Global Market: For companies that operate or sell their products/services internationally.
3. Capital Market: For smaller companies looking to raise capital.

Each tier has its own specific set of requirements that companies must meet to get listed. These requirements are divided into quantitative and qualitative criteria.

Quantitative Requirements: These include financial metrics such as earnings, market capitalization, and revenue. Companies need to meet certain thresholds in these areas to qualify for listing. For example, one of the standards for the Global Select Market requires a company to have aggregate pre-tax earnings of at least $11 million over the prior three fiscal years.

Qualitative Requirements: These involve aspects like corporate governance and regulatory compliance. Companies must adhere to strict rules to ensure transparency and protect investors. This includes having a board of directors with a majority of independent members and maintaining an audit committee.

Corporate Governance Standards: Corporate governance is vital for maintaining investor trust and ensuring the company's integrity. Nasdaq requires companies to follow several governance standards, including:

• Annual Meetings: Companies must hold annual meetings with shareholders no later than one year after the end of the fiscal year.
• Approval by Shareholders: Shareholders must approve significant actions like large acquisitions or changes in control.
• Audit Committee: At least three independent directors must form an audit committee to oversee financial reporting and disclosures.
• Code of Conduct: Every company must implement a code of conduct for all employees to ensure ethical behavior.

Meeting these requirements is essential for companies to gain and maintain a listing on Nasdaq.

How to Qualify for the Nasdaq Global Select Market

Financial Standards

To qualify for the Nasdaq Global Select Market, a company must meet one of four financial standards:

1. Earnings Standard:
2. Aggregate Pre-Tax Earnings: At least $11 million over the prior three fiscal years.
3. Positive Pre-Tax Earnings: In each of the prior three fiscal years.
4. Minimum Pre-Tax Earnings: $2.2 million in each of the two most recent fiscal years.
5. Capitalization with Cash Flow Standard:
6. Aggregate Cash Flows: At least $27.5 million over the prior three fiscal years.
7. Positive Cash Flows: In each of the prior three fiscal years.
8. Average Market Capitalization: At least $550 million over the prior 12 months.
9. Total Revenue: At least $110 million in the previous fiscal year.
10. Capitalization with Revenue Standard:
11. Average Market Capitalization: At least $850 million over the prior 12 months.
12. Total Revenue: At least $90 million in the previous fiscal year.
13. Assets with Equity Standard:
14. Market Capitalization: At least $160 million.
15. Total Assets: At least $80 million as of the most recently completed fiscal year.
16. Stockholders' Equity: At least $55 million as of the most recently completed fiscal year.

Meeting these financial standards is crucial because it demonstrates the company's financial stability and potential for growth, which attracts investors and ensures the company can sustain its operations.

Liquidity Requirements

In addition to financial standards, companies must also meet specific liquidity requirements. These requirements ensure there is enough market interest and trading activity in the company's shares.

Requirements based on the type of company:

• Initial Public Offerings (IPOs) and Spin-Off Companies:
• Shareholders: At least 450 round lot shareholders or 2,200 total shareholders.
• Publicly Held Shares: At least 1.25 million.
• Market Value of Publicly Held Shares: At least $45 million.
• Seasoned Companies (Currently Trading Common Stock or Equivalents):
• Shareholders: Similar to IPOs, requiring at least 450 round lot shareholders or 2,200 total shareholders, or 550 shareholders with an average monthly trading volume of at least 1.1 million shares.
• Publicly Held Shares: At least 1.25 million.
• Market Value of Publicly Held Shares: At least $110 million or $100 million with stockholders' equity of at least $110 million.
• Affiliated Companies:
• Shareholders: Same requirements as IPOs and seasoned companies.
• Publicly Held Shares: At least 1.25 million.
• Market Value of Publicly Held Shares: At least $45 million.

Importance of Meeting Liquidity Requirements:- Ensures sufficient trading volume and investor interest.- Helps maintain stock price stability.- Provides a fair and orderly market for the company's shares.

Meeting both financial and liquidity requirements is essential for securing a listing on the Nasdaq Global Select Market. This dual requirement ensures that the company is not only financially sound but also has an active and engaged investor base.

Steps to Qualify for the Nasdaq Global Market

Financial and Liquidity Standards

To qualify for the Nasdaq Global Market, a company must meet one of four financial standards:

1. Income Standard:
2. Annual Pre-Tax Income: At least $1 million in the most recently completed fiscal year or in two of the three most recently completed fiscal years.
3. Stockholders' Equity: At least $15 million.
4. Publicly Held Shares: At least 1.1 million.
5. Market Value of Publicly Held Shares: At least $8 million.
6. Bid Price: Minimum $4.
7. Shareholders: Minimum of 400 round lot holders.
8. Market Makers: At least three registered and active.
9. Equity Standard:
10. Stockholders' Equity: At least $30 million.
11. Operating History: Minimum of two years.
12. Publicly Held Shares: At least 1.1 million.
13. Market Value of Publicly Held Shares: At least $18 million.
14. Bid Price: Minimum $4.
15. Shareholders: Minimum of 400 round lot holders.
16. Market Makers: At least three registered and active.
17. Market Value Standard:
18. Market Value of Listed Securities: At least $75 million.
19. Publicly Held Shares: At least 1.1 million.
20. Market Value of Publicly Held Shares: At least $20 million.
21. Bid Price: Minimum $4.
22. Shareholders: Minimum of 400 round lot holders.
23. Market Makers: At least four registered and active.
24. Total Assets/Total Revenue Standard:
25. Total Assets: At least $75 million.
26. Total Revenue: At least $75 million in the most recently completed fiscal year or in two of the three most recently completed fiscal years.
27. Publicly Held Shares: At least 1.1 million.
28. Market Value of Publicly Held Shares: At least $20 million.
29. Bid Price: Minimum $4.
30. Shareholders: Minimum of 400 round lot holders.
31. Market Makers: At least four registered and active.

Meeting Publicly Held Shares and Market Value Requirements:

• Publicly Held Shares: Ensures a broad shareholder base, reducing the risk of price manipulation.
• Market Value of Publicly Held Shares: Indicates investor confidence and market perception of the company's value.

These standards ensure that companies listed on the Nasdaq Global Market are financially stable and have sufficient market interest. They provide a benchmark for investors, ensuring that listed companies are reliable and have the potential for growth.

How to Get Listed on the Nasdaq Capital Market

Financial Standards

To get listed on the Nasdaq Capital Market, a company must meet one of three financial standards:

1. Equity Standard:
2. Stockholders’ Equity: At least $5 million. This shows the company has a solid financial base.
3. Publicly Held Shares: At least 1 million. Ensures a wide distribution of shares.
4. Market Value of Publicly Held Shares: At least $15 million. Reflects investor confidence.
5. Bid Price: Minimum of $4.
6. Operating History: At least two years. Demonstrates the company has been operational long enough to show stability.
7. Shareholders: Minimum of 300 round lot holders.
8. Market Makers: At least three registered and active.
9. Market Value of Listed Securities Standard:
10. Market Value of Listed Securities: At least $50 million. Indicates significant market interest.
11. Stockholders’ Equity: At least $4 million. Confirms the company's financial strength.
12. Publicly Held Shares: At least 1 million.
13. Market Value of Publicly Held Shares: At least $15 million.
14. Bid Price: Minimum of $4.
15. Shareholders: Minimum of 300 round lot holders.
16. Market Makers: At least three registered and active.
17. Net Income Standard:
18. Net Income from Continuing Operations: At least $750,000 in the most recent fiscal year or in two of the last three fiscal years. Shows profitability.
19. Stockholders’ Equity: At least $4 million.
20. Publicly Held Shares: At least 1 million.
21. Market Value of Publicly Held Shares: At least $5 million.
22. Bid Price: Minimum of $4.
23. Shareholders: Minimum of 300 round lot holders.
24. Market Makers: At least three registered and active.

Specific Requirements:

• Stockholders’ Equity: Varies between $4 million and $5 million depending on the standard. This ensures companies have a strong financial backbone.
• Operating History: Required for the Equity Standard. Companies must have been operational for at least two years, proving they have a track record.
• Market Value: For the Market Value of Listed Securities Standard, the requirement is $50 million. This high threshold indicates that the company is substantial and widely recognized in the market.

Following these guidelines ensures that companies listed on the Nasdaq Capital Market meet essential financial and operational benchmarks. This assures investors of the company's reliability and market presence.