Understanding Nasdaq Listing Requirements

Major stock exchanges, like the Nasdaq, are exclusive clubs. Their reputations rest on the companies they trade. Only companies with a solid history and top-notch management behind them are considered.
The Nasdaq has four sets of listing requirements. Each company must meet at least one of these requirement sets, as well as the main rules for all companies.

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Each listing firm must adhere to U.S. Securities and Exchange Commission (SEC) Marketplace Rules for Nasdaq listings, including corporate governance rules 4350, 4351, and 4360. The regular bid price of shares of the company’s stock at the time of listing must be at least $4.00; however, a company may qualify under a closing price alternative of $3.00 or $2.00 if the company meets varying requirements. Typically, there must be at least three (or four depending on the criteria) market makers for the stock.

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Companies must have a minimum of 1 million publicly traded shares outstanding upon listing, excluding those held by officers, directors, or any beneficial owners of more than 10% of the company. To stay listed on the Nasdaq, a company must continue to meet the minimum listing requirements or risk being delisted and removed from the Nasdaq exchange. Companies must also have at least 450 round lot (i.e., 100 shares or more) shareholders, 2,200 total shareholders, or 550 total shareholders with a 1.1 million average trading volume over the past 12 months.

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Depending on the types of securities listed and the company’s size, an application fee of $5,000 to $25,000 is required. Companies must also pay an entry fee, which can range from $50,000 to $295,000. There are also fees depending on the number of shares listed, which range from $100,000 to $150,000. There are several other fees, depending on the type of company, including an annual listing fee, small-cap fee for smaller companies, and fees for additional services or changes such as record-keeping and additional shares issued.

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In addition to the above requirements, financial standards need to be met, depending on the type of security being listed. Standard No. 1: Earnings – The company must have aggregate pre-tax earnings in the prior three years of at least $11 million, in the previous two years at least $2.2 million, and no single year in the prior three years can have a net loss. Standard No. 2: Capitalization With Cash Flow – The company must have had a minimum aggregate cash flow of at least $27 million.

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Nasdaq has specific listing requirements for companies to be listed on its exchange. These requirements are categorized into four standards based on operating income, cash flow, capitalization, and assets with equity.

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Standard No. 1: Operating Income – Companies must have at least $5 million in operating income for the past three fiscal years, with no negative cash flow in any of those years. Additionally, the average market capitalization over the prior 12 months must be at least $550 million, and revenues in the previous fiscal year must be at least $110 million.

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Standard No. 2: Capitalization With Revenue – Companies can be exempted from the cash flow requirement of the first standard if their average market capitalization over the past 12 months is at least $850 million and revenues over the prior fiscal year are at least $90 million.

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Standard No. 3: Assets With Equity – Companies can eliminate the cash flow and revenue requirements and reduce their market capitalization requirement to $160 million if their total assets are at least $80 million and their stockholders’ equity is at least $55 million.

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Market Capitalization Requirement – The minimum market capitalization requirement for an initial listing on the Nasdaq varies depending on the requirement type: $550 million for cash flow, $850 million for revenue, and $160 million for assets and stockholder’s equity.

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Number of Companies Listed – As of December 2024, over 3,300 companies are listed on the Nasdaq exchange, which has the highest trading volume of any U.S. exchange with approximately 1.8 billion trades per day.

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Famous Companies on Nasdaq – Many renowned companies, primarily in technology, are listed on the Nasdaq. These include Apple, Microsoft, Meta (Facebook), Tesla, Amazon, Intel, Netflix, and Alphabet (Google). Non-tech companies listed include Costco, PepsiCo, and Starbucks.

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Dual Listing on NYSE and Nasdaq – Companies can be listed on more than one exchange, known as dual listing. To do so, a company must meet all listing requirements of each exchange, which is not a common practice.

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Maintaining Listing Standards – After a company gets listed on the market, it must maintain certain standards to continue trading. Failure to meet the specifications set out by the stock exchange can result in delisting. Falling below the minimum required share price or market capitalization is a major factor triggering a delisting. The exact details of a delisting depend on the exchange.

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