NASDAQ Proposes Alternative to $4 Initial Listing Bid Price Requirement for NASDAQ Capital Market | Practical Law

NASDAQ Proposes Alternative to $4 Initial Listing Bid Price Requirement for NASDAQ Capital Market | Practical Law

NASDAQ proposed an alternative to the $4 initial listing bid price requirement for the NASDAQ Capital Market. This alternative will permit companies to list with a minimum $2 price if they meet additional listing requirements.

NASDAQ Proposes Alternative to $4 Initial Listing Bid Price Requirement for NASDAQ Capital Market

by PLC Corporate & Securities
Published on 04 Jan 2012 • USA (National/Federal)
NASDAQ proposed an alternative to the $4 initial listing bid price requirement for the NASDAQ Capital Market. This alternative will permit companies to list with a minimum $2 price if they meet additional listing requirements.
On January 3, 2012, NASDAQ submitted to the SEC its proposed rule adopting an alternative to the minimum $4 price requirement for companies seeking to list on the NASDAQ Capital Market. While companies with securities priced between $2 and $4 are normally excluded from listing under the SEC's penny stock rule, the proposed rule would permit those companies to list if they also meet the express exclusion from the definition of penny stock in Rule 3a51-1(g) of the Exchange Act.
Under the proposed rule, a company may list on the NASDAQ Capital Market if it satisfies all listing standards except for the $4 price requirement. Instead, the company must have:
  • A minimum $3 price, if it qualifies under the $5 million equity or $750,000 net income alternatives.
  • A minimum $2 price, if it qualifies under the $50 million market value of listed securities alternative.
To meet the exclusion requirements of Rule 3a51-1(g), the company must also meet one of these criteria:
  • Net tangible assets in excess of $2 million, if it has been in continuous operation for at least three years.
  • Net tangible assets in excess of $5 million, if it has been in continuous operation for less than three years.
  • Average revenue of at least $6 million for the last three years.
Because the securities of a company that qualifies for initial listing under the proposed rule may later become penny stock, NASDAQ will monitor companies listed under the proposed rule. It will publish a list of any companies that initially listed under the proposed rule which do not meet the requirements of the exclusion from being a penny stock company under Rule 3a51-1.