Proposed Changes to Nasdaq Listing Standards
Nasdaq proposes to increase financial thresholds, expedite the delisting process for non-compliant companies, and introduce stricter requirements for companies with principal operations in China.
Topic Tags
Executive Summary
The first proposal (SR-NASDAQ-2025-068) suggests increasing the minimum MVUPHS under the Net Income Standard to $15 million and establishing an accelerated delisting process for companies that have both a listing deficiency and a market value of listed securities below $5 million for 10 consecutive business days. The second proposal (SR-NASDAQ-2025-069) targets companies with principal operations in China (including Hong Kong and Macau), reintroducing and setting stricter minimum IPO proceeds ($25 million) and other financial criteria for various listing pathways.
Legal Analysis and Impact
On September 3, 2025, The Nasdaq Stock Market LLC ("Nasdaq") filed two separate proposed rule changes with the U.S. Securities and Exchange Commission ("SEC") aimed at comprehensively enhancing its initial and continued listing standards.
Background
According to a Nasdaq press release on September 3, 2025, these proposals follow Nasdaq's proactive review of trading activity, particularly emerging patterns associated with potential "pump-and-dump" schemes in small company securities. John Zecca, Executive Vice President and Global Chief Legal, Risk & Regulatory Officer at Nasdaq, stated that these enhancements reflect Nasdaq's ongoing commitment to evolve its standards in step with market realities. The proposals aim to safeguard investors and promote fair and orderly markets by raising liquidity thresholds.
Proposal One (SR-NASDAQ-2025-068)—Increased Listing Liquidity and Accelerated Delisting
(1) Increased Minimum Public Float for the Net Income Standard: Nasdaq observed a significant increase in companies applying to list under the lower-threshold "Net Income Standard" after a recent rule change required IPO companies to satisfy the Market Value of Unrestricted Publicly Held Shares (MVUPHS) from the offering itself. The proposal seeks to increase the minimum MVUPHS under the Net Income Standard to $15 million (from $5 million for the Capital Market and $8 million for the Global Market), aligning it with other standards. (2) Accelerated Delisting for Non-Compliant Companies: Nasdaq proposes that for any company that is already non-compliant with one or more continued listing requirements (e.g., minimum bid price, stockholders' equity) AND whose Market Value of Listed Securities has been below $5 million for 10 consecutive business days, no compliance period will be granted; the exchange will immediately initiate suspension and delisting procedures, and a hearing request will not stay the trading suspension.
Proposal Two (SR-NASDAQ-2025-069)—Stricter Listing Standards for Companies with Principal Operations in China
Nasdaq's filing cites that since August 2022, nearly 70% of matters referred by Nasdaq to the SEC or FINRA for potential market manipulation have been related to Chinese companies, while such companies represent less than 10% of all Nasdaq listings. The proposal introduces new Rule 5210(l), imposing additional requirements on companies "principally administered" in China (including Hong Kong and Macau), with determination based on factors such as location of books and records, assets, revenues, directors, officers, employees, and control. Specific requirements include: IPO—must raise gross proceeds of at least $25 million in a Firm Commitment Offering in the United States; Business Combination/de-SPAC—minimum MVUPHS of at least $25 million following the business combination; Direct Listing—prohibited on the Nasdaq Capital Market via direct listing; Transfer from Other Markets—must have traded on the prior market for at least one year and have minimum MVUPHS of at least $25 million at the time of transfer.
Effective Date and Transition
Nasdaq has proposed that changes related to initial listing requirements (including the MVUPHS increase and the China-specific rules) will become effective 30 days after SEC approval, with a transition period for companies already in the application process. The accelerated delisting procedures would become effective 60 days after SEC approval.
Legal Analysis and Outlook: These two proposals mark a significant shift in Nasdaq's regulatory posture. For prospective issuers, especially those relying on the net income standard or with significant China connections, the financial bar for listing and the associated compliance costs will rise substantially. We advise all clients planning or already listed on Nasdaq to closely monitor the progress of these proposals and assess their potential impact on corporate capital strategy and ongoing compliance obligations.
Summary of Relevant Regulations and Rules
Regulatory references are integrated in the legal analysis section above.
