Following the NYSE American, Nasdaq Capital Market is increasing its listing standards for small companies conducting initial public offerings ("IPO") or uplistings (transferring the stock from the OTC to NASDAQ). Beginning on April 11, 2025, companies using the equity standard for a Nasdaq Capital Market IPO must raise at least $15 million; under the net income standard, they must raise at least $5 million.

NYSE American had previously increased its listing requirements to $10 million. Both exchanges have accelerated their delisting procedures for failing companies.

Under Nasdaq, a company closing below the $1.00 minimum bid price requirement for 30 consecutive business days, will receive a Nasdaq delinquency notice. Companies are then granted 180 days to regain compliance. If compliance is not regained during the initial 180 days, the company may be eligible for an additional 180 day compliance period. Old rules allowed for a stay of delisting while awaiting a hearing before the Nasdaq Listing Qualifications Hearings Panel. Under the new rules, once the additional 180 days passes, there is no stay and the security will be immediately delisted from Nasdaq.

Both platforms have imposed restrictions relating to reverse stock splits to prevent negative impact to company stock price and liquidity.

The increased standards are aimed at strengthening the liquidity and stability of the market by ensuring offerings are held to stricter financial requirements. The SEC found that investors have certain "expectations regarding the nature of securities that have achieved an exchange listing, and the role of an exchange in overseeing its market and assuring compliance with its listing standards.” The changes should allow Nasdaq “to better determine whether a security has adequate liquidity and thus is suitable for listing and trading on the Exchange. Accordingly, the amendments to Nasdaq's initial listing standards should help to ensure that it lists only securities with a sufficient market, with adequate depth and liquidity, and with sufficient investor interest to support an exchange listing.

It remains to be seen whether these enhancements will impact IPOs in the rest of 2025 and beyond. While there has generally been an uptick in traditional IPOs since 2024, there is speculation that the new rules will lead to more reverse takeovers and de-SPAC transactions as companies struggle to reach the new requirements for the IPO process. While the new rules are sure to make an impact, other tangential factors may also impact the viability of upcoming IPOs, including President Trump's pursuit of tariffs and unexpected shifts in monetary policy.

The information provided here is for general purposes and should not be considered as legal, financial, or investment advice.