Listing on Nasdaq or the New York Stock Exchange

Full Transcript

Welcome to Securities Lawyer 101, the podcast from Hamilton and Associates Law Group in Boca Raton, Florida. For many companies, a listing on Nasdaq or the New York Stock Exchange is the goal. Today we'll look at what it actually takes to get there.

First, know your options. Nasdaq has three market tiers: the Capital Market, the Global Market, and the Global Select Market. The Nasdaq Capital Market is generally designed for smaller companies, while the Global Market and Global Select Market have higher initial financial and liquidity requirements. The New York Stock Exchange group also operates NYSE American, which is often the starting point for smaller companies on that side.

Each exchange and tier has initial listing standards, and they fall into a few categories.

The first category is financial. Companies generally have to meet one of several alternative standards based on things like stockholders' equity, net income, market value of listed securities, or revenue. You don't need to meet all of them, just one complete standard, along with the other applicable listing requirements.

The second category is liquidity. The exchanges want a real market for the stock, so they require a minimum number of shareholders, often measured as round-lot holders who own at least one hundred shares, along with a minimum number of publicly held shares and a minimum market value of those shares that are eligible to be included in the public float.

The third category is price. Exchanges generally set a minimum initial bid price for listing, and it's higher than the one dollar minimum most companies need to keep once they're listed. For example, the New York Stock Exchange's standard initial listing price is currently four dollars per share, while Nasdaq's continued-listing bid-price requirement is generally one dollar per share.

The fourth category is corporate governance. Listed companies generally must satisfy corporate-governance requirements covering board independence, audit committees, executive compensation, director nominations, codes of conduct, and certain shareholder-approval policies, although the specific requirements and available exemptions vary by exchange and issuer. We'll dig into governance in a later episode.

Keep in mind that the exchange listing standards can change, including standards applicable to smaller companies and public offerings. The specific dollar thresholds change, so always confirm the current rules before you plan around them.

Now the process. The company begins the listing process by providing information to the exchange and completing the applicable review and application process, paying application fees, and providing documents about its financials, shareholders, and governance. For example, the New York Stock Exchange uses a confidential eligibility review before the formal application. The exchange's staff reviews the application, asks questions, and looks closely at the company's history, including its officers, directors, significant shareholders, and past financings. Many companies list at the same time as a public offering, which can help satisfy the shareholder and public float requirements.

After listing, the work continues. Companies must meet continued listing standards, including the minimum bid price, and must notify the exchange of certain corporate actions. Falling below a requirement typically triggers a deficiency notice and a compliance period, and repeated or serious problems can lead to delisting.

A national exchange listing can bring visibility, liquidity, and credibility, but it also brings scrutiny. Preparing early is the best way to make the application smooth.

A company should not treat the numerical listing standards as a checklist that guarantees approval. Exchanges review the full record, including the nature of the business, regulatory history, financing arrangements, shareholder distribution, promotional activity, and the backgrounds of key people. Meeting a financial formula is necessary, but the exchange can still ask detailed questions or impose conditions based on the facts.

The shareholder and public-float tests deserve particular planning because they are often misunderstood. Shares held by officers, directors, controlling holders, or other excluded or restricted persons may not count as public float. A company may have many names on a shareholder list but still lack the required number of qualifying round-lot holders. Management should reconcile beneficial ownership, record ownership, restrictions, and expected offering allocations before assuming these tests will be met.

The company should also plan for life after listing. Continued standards can differ from initial standards, but they still require monitoring of price, equity, market value, public float, shareholders, governance, and timely filings. A board calendar should include exchange notifications and approvals for financings, equity compensation, related-party matters, and corporate actions. Listing is not the finish line. It is the point at which the company begins operating under a more demanding set of market rules.

Before applying, the company should request a current-rule analysis tied to the exact market tier and listing standard it plans to use. That analysis should identify which shares count, which holders count, how price will be measured, what governance phase-ins may apply, and which approvals must occur before listing. Using a generic Nasdaq or New York Stock Exchange checklist can miss differences that matter to the transaction.

That's it for this episode. If you're considering an exchange listing, call Hamilton and Associates Law Group at five six one, four one six, eight nine five six, or visit Securities Lawyer 101 dot com to speak with a securities attorney. This podcast is for general information only. It is not legal advice, and listening does not create an attorney-client relationship. Securities rules change, so speak with qualified counsel about your specific situation.