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NASDAQ Capital Market Initial Listing Requirements Comments

Amy Tailor   |   February 26, 2008
The process of �going public� is one of the most crucial events in a company�s life. It is at once a source of pride, an opportunity for business growth, and a serious legal responsibility.

In my recent article The Wizard World of the NASDAQ, I mentioned that there are several NASDAQ Markets, each of which has specific listing requirements. This article discusses the NASDAQ Capital Market which has minimal financial requirements for initial listing.
Issuers willing to make initial listing on the NASDAQ Capital Market are required to meet all requirements listed under at least one of the three standards:

NASDAQ Capital Market Initial Listing Requirements

Requirements Standard 1 Standard 21Standard 3 Marketplace Rules2
Stockholders� equity$5 million$4 million$4 million4310(c)(2)
Market value of publicly held shares$15 million$15 million$5 million4310(c)(2)
Operating history2 yearsN/AN/A4310(c)(2)
Market value of listed securities3N/A$50 millionN/A4310(c)(2)
Net income from continuing operations (in the latest fiscal year or in two of the last three fiscal years)N/AN/A$750,0004310(c)(2)
Publicly held shares41 million1 million1 million4310(c)(7)
Bid price$4$4$44310(c)(4)
Shareholders (round lot holders)53003003004310(c)(6)
Market makers63334310(c)(1)
Corporate governanceYesYesYes4350, 4351
and 4360

  1. Seasoned companies (those companies already listed or quoted on another marketplace) qualifying only under the market value of listed securities requirement must meet the market value of listed securities and the bid price requirements for 90 consecutive trading days prior to applying for listing.
  2. Marketplace Rule 4310 is applicable to domestic (U.S.) and Canadian securities. Marketplace Rule 4320 is applicable to non-U.S. securities other than Canadian securities.
  3. Under Marketplace Rule 4200(a)(20), listed securities is defined as �securities listed on NASDAQ or another national securities exchange�.
  4. Publicly held shares is defined as total shares outstanding, less any shares held by officers, directors or beneficial owners of 10% or more. In the case of ADRs, for initial inclusion only, at least 400,000 shall be issued.
  5. Round lot holders are shareholders of 100 shares or more.
  6. An electronic communications network (ECN) is not considered a market maker for the purpose of these rules.

In addition to the listing requirements, there are also specific fees, such as entry fees, which depend on several factors like the aggregate number of shares to be listed at the time of initial listing.

Furthermore, the US issuers and non-US issuers are required to pay various fees which shall not exceed $75,000.

NASDAQ Capital Market Entry Fees

Shares Entry Fees
Up to 15 million $50,000
Over 15 million $75,000

Issuers should also consider the annual fees, which depend on the company�s Total Shares Outstanding for all classes of stock listed on the Capital Market. For non-US issuers, Total Shares Outstanding include only those shares issued and outstanding in the United States.

NASDAQ Capital Market Annual Fees

Total Shares Outstanding Annual Fees Annual Fees for ADRs
Up to 10 million $27,500 $17,500
Over 10 million $27,500 $21,000

By the highest standards, NASDAQ Capital Market is a stock market for young and emerging companies, which due to some circumstances are not able to meet the listing requirements of more respectable markets. However, in the course of time, the NASDAQ Capital Market companies may transfer to other markets, such as the NASDAQ Global Market or the NASDAQ Global Select Market. We will discuss the listing requirements of these two markets in one of our next articles. You may find the detailed information about the listing requirements, fees, applications and forms on the NASDAQ official website.
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