Nasdaq Initial Listing Requirements for Domestic and Foreign Firms

A listing on Nasdaq is the process of a company registering its shares to be traded on the Nasdaq stock exchange. This allows the company to raise capital from the public and to increase its visibility and liquidity. There are two main ways for a company to list on Nasdaq: an initial public offering (IPO) and a direct listing. To be listed on Nasdaq, a company must meet certain requirements. In this article, we will explain the Nasdaq initial listing requirements.

What is Nasdaq?

National Association of Securities Dealers Automated Quotations, popularly known as the Nasdaq, is the second-biggest stock exchange in the United States. The company has been in existence for decades. It is a public company that has a market capitalization of more than $17 billion. The biggest exchange in the United States is the New York Stock Exchange (NYSE) that is owned by the Chicago Mercantile Exchange (CME). Nasdaq is headquartered in New York.

How Nasdaq Works

As mentioned above, Nasdaq is a very big, multibillion-dollar company. The company offers a number of products. The most visible of these products is the listing board, where companies come to list. Ideally, a company that aims to raise money approaches the exchange, and if it meets Nasdaq listing requirements, the company then raises money from the market participants. The company’s shares will then be traded in the Nasdaq.

Nasdaq Listing Process

Companies that want to become public have two main options in the United States. They can select to list in Nasdaq or in the New York Stock Exchange. Ideally, the company has to go through a number of steps to become public. There are four main steps that companies follow when listing. These are:

• Nasdaq symbol reservation. Companies that are listed need to have a unique symbol, also known as the ticker. A company needs to reserve it by filling a Nasdaq symbol reservation form.
• Listing application form. The company should fill and submit a Nasdaq listing application form.
• Sign listing agreement. The company should fill a Nasdaq listing agreement form.
• Corporate governance certification. You should fill and complete this corporate governance certification document.
• Payment submission. The company should submit its payment via wire or check.
• Logo submission. Submit the company’s logo.

Nasdaq Listing Timeline

The Nasdaq listing timeline can vary depending on the company’s specific circumstances, but it typically takes four to six weeks to process a listing application. The following is a general overview of the timeline:

• Week 1: The company submits an application for listing and the Nasdaq Listing Qualifications Staff begins its review.
• Weeks 2-3: The Staff completes its preliminary review and prepares a comment letter.
• Weeks 3-4: The company addresses any issues raised by the Staff.
• Week 5: The Staff reviews the company’s responses and makes a recommendation to the Nasdaq Listing Committee.
• Week 6: The Nasdaq Listing Committee reviews the Staff’s recommendation and makes a decision on whether to approve the listing.

If the listing is approved, the company will then need to complete a number of other steps, such as filing a registration statement with the Securities and Exchange Commission (SEC), before it can begin trading on the Nasdaq.

Nasdaq Listing

Not all companies are eligible to be listed by Nasdaq. While Nasdaq is known for the technology companies that are listed, the company accepts all types of companies provided that they meet Nasdaq minimum listing requirements. For example, the company needs to be making money and it must have solid liquidity.

There are four Nasdaq listing standards that companies must meet to be eligible for listing. The four Nasdaq listing standards are Income Standard, Equity Standard, Market Value Standard, and Total Assets/Total Revenue Standard.

Nasdaq Initial Listing Requirements for Domestic Companies

The US Nasdaq requirements are as follows:

• Market Capitalization: The company must have a minimum market capitalization of $400 million.
• Operating History: The company must have at least four full fiscal years of operating history.
• Public Float: The company must have a minimum public float of $250 million.
• Financial Condition: The company must have strong financials, as evidenced by its balance sheet, income statement, and cash flow statement.
• Management Team: The company must have a strong management team with a proven track record of success.
• Governance: The company must have strong corporate governance practices, such as an independent board of directors and a code of ethics.
• Trading Volume: The company must have a minimum average daily trading volume of 100,000 shares.
• Listing Tier: The company must choose to list on either the Nasdaq Global Market or the Nasdaq Global Select Market. The Nasdaq Global Market is the highest tier of Nasdaq and has the highest listing requirements. The Nasdaq Global Select Market is the second-highest tier of Nasdaq and has slightly lower listing requirements.

Nasdaq Listing Requirements for Foreign Companies

The Nasdaq listing requirements for foreign companies are similar to those for domestic companies, but there are some additional requirements that foreign companies must meet. They are the following:

• Foreign private issuer: A foreign private issuer is a foreign (non-US), non-governmental issuer that meets the following criteria:
  • Must be a foreign (non-US), non-governmental issuer.
  • Must have 50% or less of its outstanding voting securities directly or indirectly held of record by US residents—or, if over 50% of these securities are so held, must not:
    • Have been organized or created under the laws of the United States.
    • Have its principal place of business in the United States.
    • Have more than 50% of its assets located in the United States.
    • Conduct more than 50% of its operations in the United States.
• Financial reporting: Foreign private issuers must file financial statements that are prepared in accordance with US generally accepted accounting principles (GAAP) or International Financial Reporting Standards (IFRS). The financial statements must be reconciled to US GAAP if the company uses IFRS.
• Corporate governance: Foreign private issuers must comply with Nasdaq’s corporate governance requirements, unless they are able to demonstrate that their home country’s laws and regulations would prohibit them from doing so. These requirements include having a majority of independent directors, a compensation committee that is composed of independent directors, and an audit committee that is composed of independent directors and has at least one financial expert.
• Market makers: Foreign private issuers must have at least four registered and active market makers for their securities.
• Trading volume: Foreign private issuers must have an average daily trading volume of at least 100,000 shares for the most recent six months.

In addition to these requirements, foreign private issuers may also be subject to additional requirements depending on the market on which they are listed. For example, the Nasdaq Global Select Market has stricter requirements than the Nasdaq Global Market.

Nasdaq Corporate Governance Rules

Corporate governance is a critical factor for all companies that are going public. It is important because it helps to boost the confidence of investors. Companies that are going public in Nasdaq must meet these Nasdaq corporate governance requirements:

• Distribution of Annual and Interim Reports: Companies are mandated by law to publish their annual reports to the Securities and Exchange Commission (SEC). The annual report is known as Form 10-K.
• Independent Directors: The company should have a board of directors. Some members of the board should be independent.
• Audit Committee: The audit committee is a must for all companies to have. This committee helps build confidence with investors.
• Compensation of Executive Officers: The company must have a compensation committee that is made entirely of independent directors.
• Nomination of Directors: Independent directors must recommend the appointment of directors.
• Code of Conduct: The company must have a code of conduct.
• Annual Meetings: Companies are required to conduct annual meetings.
• Conflict of Interest: The company must have policies to prevent conflicts of interest among members.
• Voting Rights: All shareholders should have voting rights in the company.

Other Nasdaq corporate governance rules are having a quorum in meetings and solicitation of proxies.

Nasdaq Market Cap Requirements

A common question that is asked is on the market cap requirements for Nasdaq listing. Companies whose Nasdaq minimum market cap falls below the required amount are eligible for delisting.

Nasdaq offers three tiers for market listing, each with specific market capitalization requirements. The highest tier, Nasdaq Global Market, mandates a minimum market capitalization of $400 million for domestic companies and $250 million for foreign companies. The second tier, Nasdaq Global Select Market, has slightly lower requirements: $350 million for domestic companies and $200 million for foreign companies. The lowest tier, Nasdaq Capital Market, requires a minimum market capitalization of $300 million for domestic companies and $150 million for foreign companies.

Nasdaq Listing Fees and Nasdaq Annual Fees

Companies that list in Nasdaq are required to pay an initial fee. Nasdaq listing fees can vary based on factors such as the type of company, the number of shares outstanding, and the specific listing tier. Companies are also supposed to pay annual fees. These fees are usually based on the total number of shares that are outstanding.

• Nasdaq Global Market:
  • Entry Fee: $270,000, plus a non-refundable $25,000 application fee.
  • Annual Fee: $112,000 to $167,000 (varies based on the number of shares being listed).
• Nasdaq Global Select Market:
  • Entry Fee: $150,000, plus a non-refundable $25,000 application fee.
  • Annual Fee: $48,000 to $86,000 (varies based on the number of shares being listed).
• Nasdaq Capital Market:
  • Entry Fee: $50,000, plus a non-refundable $5,000 application fee.
  • Annual Fee: $84,000 to $126,000 (varies based on the number of shares being listed).

In addition to the entry and annual fees, there are other fees associated with listing on Nasdaq. They include market data fees, which apply to companies using Nasdaq’s market data. Furthermore, regulatory fees are applicable to cover the expenses related to complying to Nasdaq’s regulations. Additionally, trading fees are incurred by companies for each trade executed on the Nasdaq platform.

Navigating Nasdaq Listing Requirements

Nasdaq is the second-biggest exchange in the United States. It runs a number of index funds and tools that investors use to make money. The Nasdaq listing requirements are designed to ensure that companies that are listed on Nasdaq are financially sound and have a strong management team. The requirements vary depending on the market where the company is listed, but they generally include a minimum market capitalization, a minimum public float, and strong financials.

Companies that meet the Nasdaq listing requirements can benefit from a number of advantages, such as increased liquidity, access to capital, and greater visibility to investors. However, it is important to note that listing on Nasdaq is a complex process and companies should work with a professional services such as legal, accounting, and others to understand the requirements and the process involved.