Nasdaq Capital Market: Understanding Continued Listing Requirements

The Nasdaq Stock Market LLC ("Nasdaq") recently submitted proposed enhancements to its initial and continued listing standards to the US Securities and Exchange Commission (SEC), aiming to strengthen its longstanding commitment to capital formation, investor protection, and market integrity.

These updates introduce heightened requirements for minimum public float and capital raised during initial public offerings-particularly for China-based companies-alongside stricter suspension and delisting procedures for issuers that fail to meet Nasdaq’s continued listing criteria.

The Nasdaq Stock Market LLC ("Nasdaq") filed a proposed rule change with the SEC on December 12, 2025, requesting authorization to deny initial listing to companies, even where the applicant meets all stated listing requirements.

Rationale Behind the Proposed Changes

The proposal comes after Nasdaq observed problematic or unusual trading in certain listed companies and the SEC imposed temporary trading suspensions on several listed securities based on concerns about social media pump-and-dump schemes.

According to the Nasdaq proposal, the SEC’s suspension orders have generally been based on activities of unaffiliated third parties, without any allegations that the companies themselves or persons associated with the companies were involved in the trading schemes.

Nasdaq’s existing listing requirements - which the companies that were subject to the SEC’s suspension orders satisfied both at the time of listing and on an ongoing basis - are based on the characteristics of the company itself and the securities it seeks to list. Under the current listing rules, Nasdaq does not have the authority to deny initial listings based on the actions of unaffiliated third parties.

Nasdaq Listing Rule 5101 (Nasdaq’s Regulatory Authority), in conjunction with Listing Rule IM-5101-1 (Use of Discretionary Authority), provides Nasdaq some discretion to deny listing where the company itself has engaged in misconduct or where an individual with a history of regulatory misconduct is associated with the company.

To address the issues identified by Nasdaq, new Listing Rule IM-5101-3 provides Nasdaq with authority under Rule 5101 to deny initial listing based on factors that could make the security in question susceptible to manipulation based on the concerns that Nasdaq and other regulators have identified with similarly situated companies.

Factors Considered for Denial of Initial Listing

The new rule includes a series of non-exclusive factors that Nasdaq will consider in determining whether to apply this discretion. law, data privacy laws and other laws in foreign jurisdictions that may present challenges to regulators seeking to enforce rules against the company, the ability of parties to conduct comprehensive due diligence in that jurisdiction, and the transparency of regulators in the jurisdiction.

Under the new rule, if Nasdaq denies an initial listing, Nasdaq Staff will issue a written determination describing the basis for its decision.

Proposed Amendments to Listing Standards

The Nasdaq Stock Market LLC (“Nasdaq”) recently proposed modifications to its initial and continued listing standards (“Proposed Listing Standards”). Note that if approved, Nasdaq plans to implement the changes to the initial listing requirements promptly, offering a 30-day window for companies already in the listing process to complete the process under the prior standards.

Thereafter all new listings will have to meet the new requirements. As discussed further below, a key aspect of the Proposed Listing Standards is the reintroduction of a minimum public offering proceeds requirement specifically for companies principally operating in China.

Nasdaq is proposing to raise the minimum Market Value of Unrestricted Publicly Held Shares (“MVUPHS”) requirement for companies listing under the net income standard on the Nasdaq Global Market and the Nasdaq Capital Market. As Nasdaq explains in its proposal, the MVUPHS standard is one of the core liquidity requirements of the Nasdaq listing rules.

Like the other liquidity requirements, it is meant to ensure there is sufficient liquidity to provide price discovery and support an efficient and orderly market for a company’s securities. Nasdaq is also proposing to amend its rules to accelerate the suspension and delisting process for certain noncompliant companies.

Specifically, if a company that has a Market Value of Listed Securities (“MVLS”) of less than US$5 million becomes noncompliant with a quantitative continued listing requirement (minimum bid price, MVLS or market value of publicly held shares), it will be subject to immediate suspension and delisting without a compliance period.

Under the current rules, a company listed on Nasdaq that falls out of compliance with quantitative continued listing requirements is typically granted a 180-day grace period to regain compliance. A request for a hearing usually stays the delisting process. The Proposed Listing Standards would eliminate the grace periods for a company whose MVLS has remained below US$5 million for 10 consecutive business days.

Nasdaq rules have minimum requirements for companies to remain listed and generally offer grace periods to companies that fail to maintain compliance with those rules.

Nasdaq Listing Rules establish minimum quantitative standards that companies must meet to remain listed. If a company fails to maintain compliance with these standards, it may be granted a period to regain compliance.

Generally, a Nasdaq-listed company is provided a 180-calendar-day compliance period if it fails to meet continued listing requirements related to minimum bid price, market value of listed securities, or market value of publicly held shares; and a 30-calendar-day compliance period may apply if the company fails to meet the requirement for the minimum number of market makers.

For other quantitative deficiencies-such as stockholders’ equity, net income, number of public holders, number of publicly held shares, total assets, or total revenue-Nasdaq does not automatically grant a compliance period. Instead, the company may submit a plan of compliance for Nasdaq’s review. Upon review, Nasdaq may grant an extension of up to 180 calendar days to regain compliance.

If the company fails to regain compliance within the applicable period, or if Nasdaq rejects the compliance plan, Nasdaq will issue a delisting determination letter. Upon receiving this letter, the company may request a hearing in a timely manner.

In recent years, while Nasdaq has already taken actions to enhance its listing standards and more quickly delist certain companies that have repeated failures to maintain compliance with those standards, Nasdaq now proposes further to provide for suspension from Nasdaq trading and immediate delisting (rather than providing a compliance period) of any company that becomes noncompliant with a numeric listing requirement and that has a market value of listed securities of less than $5 million for a period of 10 consecutive business days.

Specific Requirements for China-Based Companies

Nasdaq is also proposing to adopt a new listing requirement for companies based in China specifically.

In its proposed rule, Nasdaq noted that it has identified concerns with the trading of Chinese companies, identifying that “70% of the matters that Nasdaq has referred to the SEC or FINRA since August 2022 have been related to trading in Chinese companies.

Implementation and Effective Date

Nasdaq is proposing a delay of 30 days after approval before the changes become effective. If the proposed rule is approved by the SEC, Nasdaq is proposing to implement the changes to the initial listing requirements promptly, but will give companies that have already taken steps to commence an initial listing 30 days to complete the process under the prior standards, and thereafter all new listings will have to meet the new requirements.

SEC Review and Approval

Nasdaq’s proposed amendments (SR-NASDAQ-2025-068 and SR-NASDAQ-2025-069) remain subject to the SEC review and approval. The SEC will make its decision within 45 days of the date of publication of the proposals in the Federal Register or within such longer period (1) as the SEC may designate up to 90 days of such date or (2) as to which Nasdaq consents.

Once adopted, smaller issuers may face higher thresholds when seeking to list on Nasdaq or maintain their listing status. Companies considering a US listing-particularly those with China-based operations-should closely monitor developments.

Minimum MVUPHS Requirements

The current Nasdaq Listing Rules require a company to have a minimum Market Value of Unrestricted Publicly Held Shares (MVUPHS)-i.e., market value of shares that are not held directly or indirectly by an officer, director, or 10% shareholder and which are not subject to resale restrictions of any kind.

For initial listing on the Nasdaq Global Market, a company must have a minimum MVUPHS of $8 million under the income standard, and for initial listing on the Nasdaq Capital Market, a company must have a minimum MVUPHS of $5 million under the net income standard.

Recently, Nasdaq amended the liquidity requirements for initial listing such that shares registered for resale are no longer counted as Unrestricted Publicly Held Shares, as a result of which a newly listing company listing in connection with an initial public offering must meet the MVUPHS based on shares being sold in the offering.

Now, Nasdaq is proposing to increase the minimum MVUPHS for companies listing under the net income standard on the Nasdaq Capital Market from $5 million to $15 million.

Summary of Proposed Changes

Nasdaq determined that additional rules beyond the September proposals were necessary to address the concerns of pump-and-dump schemes affecting newly listed companies. The proposed rule change is immediately effective, and Nasdaq proposes to apply the rule to all companies currently in the application process.

By receiving the authority to exercise discretion to deny initial listings in this manner, Nasdaq believes it can better address situations in which a company satisfies Nasdaq's listing requirements, but has characteristics similar to other companies' securities where trading problems were observed and could make the company susceptible to manipulation.

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