On December 30,2024, Nasdaq announced a blockbuster proposal to amend the initial public offering (IPO) rules, which has been approved by Nasdaq's board of directors and is currently pending further review by the Securities and Exchange Commission (SEC). The proposal is aimed at the Nasdaq Global Market (NASDAQ Global Market) and Nasdaq Capital Markets (NASDAQ Capital Market), and is aimed at amending sections 5405 and 5505 of the Listing Rules to raise the launch threshold.

Original link：https://www.federalregister.gov/documents/2024/12/30/2024-30898/self-regulatory-organizations-the-nasdaq-stock-market-llc-notice-of-filing-of-proposed-rule-change

The new regulation core content analysis

According to the new rules, when calculating the minimum market value requirement for tradable shares (MVUPHS), only the shares raised by the company through public offerings will be included, and the shares previously registered for resale, as well as the shares held by resale shareholders or legacy shareholders, are no longer counted in the tradable shares that meet the listing requirements. This means that only shares held by the company's executives, directors or other public shareholders other than more than 10% of shareholders are required for listing. For example, if a company plans to IPO, some of the issued shares are previously registered for resale. According to the new rules, the resale shares can no longer be counted as the market value of the tradable shares that meet the listing conditions.

Nasdaq listing: MVUPHS Standard Rules

For the first time listed on the NASDAQ global market, there are different requirements for MVUPHS according to different standards:

Revenue criteria: The company must have at least $8 million in MVUPHS;

Equity standard;you must have a MVUPHS of at least $18 million;

Market Value Standard or Total Assets / Total Income Standard: Must have a minimum MVUPHS of $20 million.

The first listing on the Nasdaq Capital Market is also based on different criteria:

Net income criteria: The company's MVUPHS must be at least $5 million;

Equity standard or market value standard of listed securities: The company's MVUPHS must be at least $15 million.

Nasdaq said MVUPHS standards are crucial to ensuring market liquidity, and highly liquid stocks are conducive to revealing prices and create an efficient trading environment. Some companies calculate the resale shares into the market value of the tradable shares, and the liquidity of the resale shares are often not as good as the shares issued by public offerings. Excluding the calculation of the resale shares will more accurately reflect the real liquidity situation of the company's shares, which is the main reason for the revision of the rules.

The impact of the new rules on small and medium-sized enterprises

The new Nasdaq IPO rules have affected all types of companies, which appears to be aimed directly at small and medium-sized companies. Under the new rules, small and medium-sized companies can no longer rely on resale shares to meet the listing requirements, the liquidity requirements have been significantly increased, and the threshold for listing in the US has been significantly raised. In 2024, according to the new proposed rules, only 8 companies are eligible, accounting for 12%. This data intuitively shows that the new rules are undoubtedly a huge challenge for small and medium-sized enterprises.

Although Nasdaq's new rules pose challenges to some companies and investors, in the long run, it optimizes market rules, lays a solid foundation for the steady development of the capital market, and brings a new guarantee. If the small and medium-sized enterprises are planning to list in the United States, they should seize the time, speed up the preparation of listing enterprises, submit applications before the implementation of the new rules, and grasp the "window period" of the policy. I hope this article will help you better understand the new Nasdaq rules and their implications.

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