On September 3, 2025, Eastern Time, Nasdaq announced a series of proposed changes to its initial listing standards. The revisions aim to strengthen regulatory requirements for certain international companies and small-capitalization companies, reinforcing Nasdaq’s long-standing commitment to capital formation, investor protection, and market integrity. This move has quickly drawn significant market attention, particularly from companies seeking to list on the exchange.
I. According to Nasdaq’s filing, the Revised Standards mainly Cover Three Areas
1. Higher MVUPHS Threshold for Net Income Standard
Nasdaq is proposing to significantly increase the Minimum Market Value of Unrestricted Publicly Held Shares (MVUPHS) requirement specifically for new listing companies choosing to list under the Net Income Standard.
If a company chooses to list on Nasdaq under the net income standard, the minimum market value of its unrestricted publicly held shares must reach $15 million.
|
Market Tier |
Current Standard |
Proposed New Standard |
Change |
|
Capital Market |
$5 million |
$15 million |
+200% |
|
Global Market |
$8 million |
$15 million |
+87.5% |
It’s important to note that the MVUPHS requirements for other listing standards remain unchanged. The current requirements for the Capital and Global Markets are as follows:
|
Market Tier |
Equity Standard |
Market Value or Total Assets/ Total Revenue Standards |
|
Capital Market |
$15 million |
$15 million |
|
Global Market |
$18 million |
$20 million |
According to Nasdaq, this increase is designed to enhance market liquidity, mitigate the risks of market manipulation, and harmonize listing criteria, with the ultimate goal of safeguarding investors and promoting orderly market.
2. Accelerated Delisting Mechanism: Immediate Trading Halt for Companies with Market Cap Below $5 Million
If a company has listing deficiencies and its market value of listed securities (MVLS) remains below $5 million for 10 consecutive trading days, it will be immediately suspended and subject to delisting, with no compliance period.
|
Feature |
Current Mechanism |
Proposed New Mechanism |
|
Trigger Condition |
Stock Price: If the closing bid price is <$1 for 30 consecutive trading days, the company enters a 180-calendar-day initial compliance period. If a compliance plan is submitted and approved by Nasdaq within the last 30 days of the period, an additional 180-day extension may be granted (total of 360 days). If the company still fails to meet the standard within 1 year after a reverse stock split, or if the stock price falls to ≤$0.10 for any 10 consecutive trading days, it will be immediately delisted with no compliance period. MVLS: If MVLS is <$35 million for 30 consecutive trading days, the same 180+180-day compliance period applies. A delisting decision can only be made after the period ends and a hearing is completed. MVPHS: If MVPHS is <$1 million for 30 consecutive trading days, and other quantitative deficiencies exist, the 180+180-day process still applies; no immediate delisting. Only two scenarios—”≤$0.10” or “reverse split failure”—cancel all grace periods, with immediate delisting and trading halt. |
If MVLS is <$5 million for 10 consecutive trading days, and listing deficiencies exist, the company will be immediately suspended and subject to delisting. |
|
Appeal Rights |
Yes, company can appeal |
Yes, company can appeal |
|
Trading Status During Appeal |
Trading on Nasdaq typically continues during the appeal process.
|
Trading is immediately halted on Nasdaq. However, the company's securities may continue to trade in the over-the-counter (OTC) market while the appeal is pending. |
|
Total Process Time |
Up to 18 months |
Very short, expected to be only a few months |
This revision signals that Nasdaq will no longer tolerate long-term “shell companies” or “zombie firms”, aiming to clean up the market and improve overall quality.
3. New Special Requirements for Chinese Concept Stocks: IPO Proceeds Must Be ≥ $25 Million
For companies primarily operating in China (including Hong Kong and Macau), Nasdaq proposes additional listing thresholds. These new rules are proposed to become effective 30 days after SEC approval.
a. Applicable Scope
A company is deemed “primarily operating in China” if it meets any of the following:
(1) The company’s books and records are located in China.
(2) At least 50% of the company’s assets are located in China.
(3) At least 50% of the company’s revenues are derived from China.
(4) At least 50% of the company’s directors are citizens of, or reside in, China.
(5) At least 50% of the company’s officers are citizens of, or reside in, China.
(6) At least 50% of the company’s employees are based in China.
(7) The company is controlled by, or under common control with, one or more persons or entities that are citizens of, reside in, or whose business is headquartered, incorporated, or principally administered in China.
b. New Requirements
|
Listing Method |
New Requirement |
|
IPO |
Must raise at least $25 million through a firm-commitment underwriting offering |
|
SPAC Merger |
Post-merger market value of unrestricted publicly held shares must be at least $25 million |
|
Direct Listing |
Direct listing on the Capital Market (NCM) is prohibited; only allowed on Global Select (NGS) or Global Market (NGM) |
|
Uplisting |
Must have traded for at least one year on OTC or another exchange, and publicly held shares of ≥ $25 million |
II. Policy Background and Regulatory Logic
This revision is not an isolated event, but part of a broader trend of tightening U.S. capital market regulation. It reflects Nasdaq’s institutional response to pressures spanning investor protection, market quality improvement, and cross-border regulatory coordination.
· HFCAA (Holding Foreign Companies Accountable Act) Continues to Take Effect: The act mandates trading prohibitions for issuers from jurisdictions where the PCAOB cannot conduct audit inspections. Within this regulatory context, Nasdaq has proposed new listing criteria, aligning its rules with the heightened focus on investor protection and market integrity.
· SEC and PCAOB Have Repeatedly Warned About “low market capitalization and low liquidity” Risks. U.S. regulators have consistently highlighted risks from low-liquidity stocks. Nasdaq’s new immediate delisting rule for companies with an MVLS <$5 million is a direct response to this regulatory guidance.
· Nasdaq Faces Internal Pressure Over Market Quality: According to Nasdaq’s SEC filing, since August 2022, nearly 70% of trading matters referred to regulators involved Chinese companies, which account for less than 10% of all Nasdaq listings. Nasdaq stated these stocks are prone to low liquidity and are "more susceptible to manipulation," justifying its new rules as necessary to protect "fair and orderly trading."
Thus, this revision marks Nasdaq’s strategic shift from an inclusive market to a quality-first market, proactively aligning with regulatory direction and pre-empting risk.
III. Reshaping the Listing Landscape
Small-Cap Listings Become Impractical: Companies with IPO proceeds <$25 million or market cap <$5 million will be blocked from listing or rapidly delisted.
Variable Interest Entity (VIE) Structures Cannot Circumvent Rules: Even if a firm uses a VIE structure, it will still be deemed primarily operating in Relevant Jurisdiction if its assets, revenues, personnel, or control relationships are predominantly located there, regardless of its place of incorporation.
Shell Games and OTC Uplisting Routes Shut Down: Reverse mergers, OTC-to-Nasdaq uplisting, and other “backdoor listing” methods are no longer viable due to higher market cap and trading history requirements.
Rising Liquidity Needs and Compliance Costs: The Higher liquidity requirements and the immediate delisting mechanism will compel companies to onboard more international investors and enlarge their underwriting syndicates well in advance, while simultaneously strengthening continuous information disclosure; failure to do so will sharply increase the risk of trading suspension.
IV. Conclusion
Nasdaq’s proposed listing standard revisions represent a systematic upgrade in market quality and investor protection. These changes align with the HFCAA and SEC regulatory direction, and reflect the exchange’s institutional response to cross-border audit issues and liquidity risks.
Once implemented, Nasdaq will raise the bar for issuer quality globally. Affected companies, particularly those from jurisdictions with heightened scrutiny, will face stricter requirements in terms of market cap, fundraising, and ongoing compliance.
References:
https://listingcenter.nasdaq.com/assets/rulebook/nasdaq/filings/SR-NASDAQ-2025-068.pdf
https://listingcenter.nasdaq.com/assets/rulebook/nasdaq/filings/SR-NASDAQ-2025-069.pdf