How Can I List My Company on NASDAQ?

Going Public Lawyer

Securities Lawyer 101 Blog

Private companies that go public often attempt to list on a national securities exchange.  One of these, the NASDAQ Stock Market (“NASDAQ”) has three distinct tiers for companies considering an exchange listing as part of their going public transaction.  These tiers are the NASDAQ Global Select Market, the NASDAQ Global Market and the NASDAQ Capital Market.  Issuers must satisfy specific financial, liquidity and corporate governance requirements in order to list on any of the NASDAQ tiers.

The initial financial and liquidity requirements for the NASDAQ Global Select Market are more stringent than those for the NASDAQ Global Market; and likewise, the initial listing requirements for the NASDAQ Global Market are more stringent than those for the NASDAQ Capital Market.

It is important to note that even though a company’s securities meet all NASDAQ’s criteria for initial inclusion, NASDAQ may deny initial listings, or apply additional conditions to any listing, at its discretion.  Companies can apply initially to list on the NASDAQ when going public or subsequent to going public by moving up from  the the OTCMarkets or another stock exchange.

Corporate Governance

Companies listed on the NASDAQ Stock Market are required to meet certain corporate governance standards.  NASDAQ’s Corporate governance requirements are the same across all NASDAQ market tiers.  Certain exemptions and phase-ins from these requirements apply to limited partnerships, foreign private issuers, initial public offerings and controlled companies.

Corporate Governance RequirementDescription
Distribution of Annual or Interim ReportsThe company must make its annual and interim reports available to shareholders, either by mail or electronically through the company’s website.
Independent DirectorsThe company’s board of directors is required to have a majority of independent directors.
Audit CommitteeThe company is required to have an audit committee consisting solely of independent directors who also satisfy the requirements of SEC Rule 10A-3 and who can read and understand fundamental financial statements.  The audit committee must have at least three members.  One member of the audit committee must have experience that results in the individual’s financial sophistication.
Compensation of  Executive OfficersIndependent directors must determine the compensation of the chief executive officer and other executive officers.
Nomination of DirectorsIndependent directors must select or recommend nominees for directors.
Code of ConductThe company must adopt a code of conduct applicable to all directors, officers and employees.

Corporate Governance RequirementDescription
Annual MeetingsThe company is required to hold an annual meeting of shareholders no later than one year after the end of its fiscal year.
Solicitation of ProxiesThe company is required to solicit proxies for all shareholder meetings.
QuorumThe company must provide for a quorum of not less than 33 1/3% of the outstanding shares of it voting stock for any meeting of the holders of its common stock.
Conflict of InterestThe company must conduct appropriate review and oversight of all related party transactions for potential conflict of interest situations.
Shareholder ApprovalThe company is required to obtain shareholder approval of certain issuances of securities, including:

     Acquisitions where the issuance equals 20% or more of the pre-transaction outstanding shares, or 5% or more of the pre-transaction outstanding shares when a related party has a 5% or greater interest in the acquisition target

     Issuances resulting in a change of control

     Equity compensation

     Private placements where the issuance equals 20% or more of the pre-transaction outstanding shares at a price less than the greater of book or market value.  Voting Rights, Corporate actions or issuances cannot disparately reduce or restrict the voting rights of existing shareholders.

NASDAQ Global Select Market

Issuers must meet the listing criteria for the NASDAQ Global Select Market set forth in the two charts that follow.  The first chart sets forth the financial requirements and the second sets forth the liquidity requirements.  Issuers must satisfy the criteria under one of the four financial standards and liquidity requirements in the second chart.

Financial RequirementsStandard 1: EarningsStandard 2: Capitalization with Cash FlowStandard 3: Capitalization with RevenueStandard 4: Assets with Equity
Pre-Tax Earnings (income from continuing operations before income taxes)Aggregate in prior three fiscal years > $11 million
and

Each of the prior three fiscal years > $0 and

Each of the two most recent fiscal years > $2.2 million———Cash Flows—Aggregate in prior three fiscal years >
$27.5 million and
Each of the prior three fiscal years

>$0——Market Capitalization—Average > $550 million over prior

12 monthsAverage > $850 million over prior

12 months$160 millionRevenue—Previous fiscal year > $110 millionPrevious fiscal year >

$90 million—Total Assets———$80 millionStockholders’ Equity———$55 millionBid Price$4$4$4$4


Liquidity RequirementsInitial Public Offerings and Spin-Off CompaniesSeasoned Companies: Currently Trading Common Stock or Equivalents

Affiliated Companies

Round Lot Shareholders or Total Shareholders or
Total Shareholders and Average Monthly Trading Volume over Past Twelve Months
450 or 2,200

450 or
2,200 or
550 and 1.1 million

450 or
2,200 or
550 and 1.1 million

Publicly Held Shares1,250,0001,250,0001,250,000
Market Value of Publicly Held Shares or Market Value of Publicly Held Shares and Stockholders’ Equity$45 million$110 million or  100 million and $110 million$45 million

NASDAQ  Global Market

Issuers must meet all of the criteria under at least one of the four standards below to qualify for the NASDAQ Global Market.  Additionally, issuers must meet the $75 million Market Value of Listed Securities and the $4 bid price requirement for 90 consecutive trading days before applying.

RequirementsIncome StandardEquity StandardMarket Value Standard*Total Assets/Total Revenue Standard
Income from continuing operations before income taxes (in latest fiscal year or in two of last three fiscal years)$1 million
Stockholders’ Equity$15 million$30 million
Market Value of Listed Securities$75 million
Total Assets and Total Revenue (in latest fiscal year or in two of last three fiscal years)$75 million and $75 million
Publically Held Shares1.1 million1.1 million1.1 million1.1 million
Market Value of Publicly Held Shares$8 million$18 million$20 million$20 million
Bid Price$4$4$4$4
Shareholders (round lot holders)400400400400
Operating History2 years

NASDAQ Capital Market

Companies qualifying solely under the Market Value Standard must meet the $50 million Market Value of Listed Securities and the applicable bid price requirement for 90 consecutive trading days before applying.  To qualify under the closing price alternative, a company must have: (i) average annual revenues of $6 million for three years, or (ii) net tangible assets of $5 million, or (iii) net tangible assets of $2 million and a 3 year operating history, in addition to satisfying the other financial and liquidity requirements listed below.  Issuers must meet all of the criteria under at least one of the three standards below to list on the NASDAQ Capital Market.

RequirementsEquity StandardMarket Value of Listed Securities Standard*Net Income Standard
Stockholders’ Equity$5 million$4 million$4 million
Market Value of Publicly Held Shares$15 million$15 million$5 million
Operating History2 years
Market Value of Listed Securities$50 million
Net Income from Continuing Operations (in the latest fiscal year or in two of the last three fiscal years)$750,000
Publicly Held Shares1 million1 million1 million
Shareholders (round lot holders)300300300
Market Makers333
Bid Price OR Closing Price$4 OR $3$4 OR $2$4 OR $3

Fees For Listing

Entry fees are based upon the aggregate number of shares outstanding at the time of initial listing.

NASDAQ Global Select Market and NASDAQ Global Market

Total Shares OustandingEntry Fee
Up to 30 million$125,000 including $25,000 application fee
30+ to 50 million$150,000, including $25,000 application fee
50+ to 100 million$200,000, including $25,000 application fee
Over 100 million$225,000 including $25,000 application fee

NASDAQ Capital Market

Total Shares OustandingEntry Fee
Up to 15 million$50,000, including $5,000 application fee
Over 15 million$75,000, including $5,000 application fee

For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com.  This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship.  Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com