NASDAQ Listing Requirements


The National Association of Securities Dealers Automated Quotations (NASDAQ) is a nationally recognized securities exchange, following right behind the New York Stock Exchange (NYSE) in terms of market capitalization. The NASDAQ, as an organization, was founded in the year 1971 and gained recognition from the SEC in 2006. With its constituent companies having a combined market capitalization of over $8.5 trillion, NASDAQ is the preferred marketplace for technology and bio-technology stocks. The exchange is well known for the high-volatility trading that takes place in its electronic marketplace. NASDAQ’s normal trading hours are between 9:30am and 4:00pm Eastern time, with a pre-market session from 4:00am to 9:30am and post-market session from 4:00pm to 8:00pm Eastern time.

NASDAQ is segregated into three distinct tiers: The NASDAQ Global Select Market (which has the most rigorous listing requirements of all three tiers as well as any stock exchange around the globe), The NASDAQ Global Market (for companies that operate or sell their products/services internationally), and The NASDAQ Capital Market (for companies wishing to raise capital). Each tier has their own unique listing requirements.

Listing Requirements

Companies that want to list their securities on NASDAQ must meet certain requirements including both quantitative and qualitative requirements, with additional requirements that must be met throughout the duration of the security’s listing. Companies must also adhere to corporate governance standards.

Before a company files a complete application, they have the option to undergo a preliminary listing eligibility review. The Listing Qualifications staff will attempt to determine whether a company has met the numerical listing criteria through reviewing public filings, and if the company has any reason for regulatory concerns. A preliminary listing eligibility review is not the same as filing a formal application.

NASDAQ Global Select Market

Companies must meet all of the criteria under at least one of four different financial standards:

Financial Requirements

Standard 1: Earnings

Standard 2: Capitalization with Cash Flow

Standard 3: Capitalization with Revenue

Standard 4: Assets with Equity

Listing Rules

5315(e) and 5315(f)(3)(A)

5315(e) and 5315(f)(3)(B)

5315(e) and 5315(f)(3)(C)

5315(e) and 5315(f)(3)(D)

Pre-Tax Earnings

Aggregate in prior three fiscal years above or equal to $11mm, and each of the prior three fiscal years above or equal to $0, and each of the two most recent fiscal years above or equal to $2.2mm

-

-

-

Cash Flows

-

Aggregate in prior three fiscal years above or equal to $27mm, and each of the prior three fiscal years above or equal to $0

-

-

Market Cap

-

Average above or equal to $550mm over prior 12 months

Average above or equal to $850mm over prior 12 months

$160mm

Revenue

-

Previous fiscal year above or equal to $110mm

Previous fiscal year above or equal to $90mm

-

Total Assets

-

-

-

$80mm

Stockholders’ Equity

-

-

-

$55mm

Bid Price

$4

$4

$4

$4

Companies trying to qualify for the NASDAQ Global Select Market’s initial listing standards must also meet these liquidity requirements:

Liquidity Requirements

Initial Public Offerings and Spin-Off Companies

Seasoned Companies: Currently Trading Common Stock or Equivalents

Affiliated Companies

Listing Rule

Round lot shareholders or Total shareholders or Total shareholders and average monthly trading volume over past twelve months

450 or 2,200

450 or 2,200 or 550 and 1.1mm

450 or 2,200 or 550 and 1.1mm

5315(f)(1)

Publicly Held Shares

1,250,000

1,250,000

1,250,000

5315(e)(2)

Market value of publicly held shares or Market value of publicly held shares and stockholders’ equity

$45mm

$110mm or $100mm and $110mm

$45mm

5315(f)(2)


NASDAQ Global Markets

Companies must meet all of the criteria of at least one of four standards listed below.

Requirement

Income Standard

Equity Standard

Market Value Standard

Total Assets/ Total Revenue Standard

Listing Rules

5405(a) and 5405(b)(1)

5405(a) and 5405(b)(2)

5405(a) and 5405(b)(3)

5405(a) and 5405(b)(4)

Income from continuing operations before income taxes (in latest fiscal year or in two of last three fiscal years)

$1mm

-

-

-

Stockholders’ Equity

$15mm

$30mm

-

-

Market Value of Listed Securities

-

-

$75mm

-

Total Assets and Total Revenue (in latest fiscal year or in two of last three fiscal years)

-

-

-

$75mm and $75mm

Publicly Held Shares

1.1mm

1.1mm

1.1mm

1.1mm

Market Value of Publicly Held Shares

$8mm

$18mm

$20mm

$20mm

Bid Price

$4

$4

$4

$4

Shareholders (round lot holders)

400

400

400

400

Market Makers

3

3

4

4

Operating History

-

2 years

-

-


NASDAQ Capital Market

Companies must meet all of the criteria of at least one of three standards listed below.

Requirements

Equity Standard

Market Value of Listed Securities Standard

Net Income Standard

Listing Rules

5505(a) and 5505(b)(1)

5505(a) and 5505(b)(2)

5505(a) and 5505(b)(3)

Stockholders’ Equity

$5mm

$4mm

$4mm

Market Value of Publicly Held Shares

$15mm

$15mm

$5mm

Operating History

2 years

-

-

Market Value of Listed Securities

-

$50mm

-

Net Income from Continuing Operations (in the latest fiscal year or in two of the last three fiscal years)

-

-

$750K

Publicly Held Shares

1mm

1mm

1mm

Shareholders (round lot holders)

300

300

300

Market Makers

3

3

3

Bid Price OR Closing Price

$4

$3

$4

$2

$4

$3

Listing Fees

Depending on which market your company is attempting to qualify for, and what type of security your company is planning on issuing, there will be different listing fees.

Market entry fees, based on the total number of shares outstanding at the time of initial listing, includes a non-refundable application fee. Entry fees are due before the first day of trading.

Entry fees for the three different tiers are listed below:

NASDAQ Global Select Market and NASDAQ Global Market

Total Shares Outstanding

Entry Fee

Up to 30mm

$125K, including $25K application fee

30+ to 50mm

$150K, including $25K application fee

50+ to 100mm

$200K, including $25K application fee

Over 100mm

$225K, including $25K application fee

NASDAQ Capital Market

Total Shares Outstanding

Entry Fee

Up to 15mm

$50K, including $5K application fee

Over 15mm

$75K, including $5K application fee

For the full NASDAQ listing requirements, see the NASDAQ Initial Listing Guide.

Corporate Governance

The three tiers of the NASDAQ stock market all have similar rigorous standards regarding corporate governance. Companies are subject to the following corporate governance standards and categories:

  • Annual Meetings: No later than one year after the end of a company’s fiscal year, an annual meeting with shareholders must be held.
  • Approval by Shareholders: Companies must gain approval from their shareholders when there is an acquisition of 20% or more of outstanding shares or when issuances are made that result in a change of control.
  • Audit Committee: Companies must have audit committees of at least three independent directors.
  • Code of Conduct: Companies must create a code of conduct that applies to all employees.
  • Conflict of Interest: Companies must conduct oversight to determine any potential conflict of interest situations.
  • Distribution of Annual Reports: Shareholders must have access to annual and interim reports.
  • Director Nominations: Independent directors are responsible for selecting and/or recommending director nominees.
  • Executive Officer Compensation: Companies must create a compensation committee of at least two independent directors. The committee recommends and/or determines the compensation of the CEO and all other executive officers.
  • Independent Directors: A majority of the board of directors must be independent directors.
  • Proxy Solicitation: Proxies must be solicited for any shareholder meeting.
  • Quorum: For any company meetings with holders of common stock, a quorum must exist of no less than 1/3 of the company’s outstanding shares of voting stock.
  • Voting Rights: A company cannot take any action to restrict a shareholder’s voting rights.

Seasoning Rules

NASDAQ adopted ‘seasoning rules’ in 2011, which restrict companies who have completed reverse mergers with a public shell from submitting an application until 1) the company has traded on an over-the-counter market, another national securities exchange, or a regulated foreign exchange or 2) one year has passed since all required information from the merger has been filed. Companies must also file all required reports for the merger, including an annual report.

For at least 30 days prior to filing the application, the reverse merger company must also keep their closing price stock equal to the initial listing standard that applied to the company’s stock price. An exception exists for to companies that complete a firm commitment that has net proceeds of at least $40 million.

The SEC also maintains the right to impose more requirements on a company if they believe it is warranted.

Application Requirements

Depending on a company’s circumstances, there are 12 different NASDAQ listing applications, designed to cover situations where there has been a change of control, a company has completed an IPO, etc.

All applications are approximately 7 pages in length and require companies to submit basic information, in addition to information about the specific security. Companies must also disclose any investigations or lawsuits within the 10 years prior to the application that involve the company.

The formal NASDAQ application package requires a company to submit a:

  • Symbol reservation form
  • Listing application
  • Listing agreement
  • Corporate governance certification
  • Initial application fee (see above)
  • Logo submission form

Companies who wish to get listed on any of the the NASDAQ market tiers can submit an online application to the exchange’s Listing Center webpage. Getting listed on a NASDAQ market tier is a four step process, which includes: 1. Gathering Company Information, 2. Creating an Account with the NASDAQ, 3. Completing an Online Listing Form, and 4. Connecting with a Personal Analyst. Submitted applications typically take 4-6 weeks to process.

Benefits

Trading on a national exchange helps companies attract investors, have higher trading volume and increased liquidity. Broker-dealers are more easily able to participate in the IPO and subsequent trading, because while they are not typically able to recommend penny stocks to their clients, exchange listed stocks are not subject to the penny stock definition.

Colonial Stock Transfer can help provide SEC registered transfer agent services for your IPO as well as help you with your NASDAQ application. To speak with a professional today or learn more, please contact us.