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The reputations of most global stock exchanges such as the Nasdaq rest on the companies they trade. As such, the Nasdaq will not allow just any company to be traded on its exchange. It only wants the best - companies with a good history and great management behind them.
Apart from the main rules for all companies, Nasdaq has three sets of listing requirements. A company must meet at least one of the three requirement sets, to trade on Nasdaq.
Listing Requirements for All Companies Rule 4420Each company that wants to trade on the Nasdaq must have a minimum of 1.1 million publicly-traded shares on listing, excluding those held by officers, directors or any beneficial owners of more then 10 per cent of the company. The minimum bid price of the stock on listing must be at least $5. Each listing firm is also required to follow Nasdaq Corporate Governance rules 4350, 4351 and 4360. Companies must also have at least 400 shareholders to list on the Nasdaq. A shareholder is defined by Nasdaq as one that holds of over 100 shares.
Requirement Rule 4420 (a)The company wishing to list on Nasdaq must have a minimum shareholder equity of $15 million. The operating income from either the last fiscal, or two of the last three years, must total a minimum of $1 million. The company must have a minimum of three market makers that will provide liquidity to the trading of its stock. The market value of the publicly-held shares on trading must be worth at least $8 million.
Requirement Rule 4420 (b)The listing company must have a minimum shareholder equity of $30 million. The market value of the shares traded must be at least $18 million on listing. The company also has to have a minimum operating history of two years. It is also required to have three market makers. It can be seen here that if a company does not earn enough to meet the operating income minimum, it needs to have greater shareholder equity and a larger market value.
Requirement Rule 4420 (c)Under this listing requirement companies must have at least $75 million in total assets, total revenue, or listed securities. Listed securities are defined by the Nasdaq as securities listed on either a Nasdaq or another national exchange. The market value of the scrips on listing must be worth at least $20 million. The listing company is also required to add an additional market maker, that is, have a total of four market makers.
A company has three ways to get listed on the Nasdaq depending on its underlying fundamentals. If a company does not meet certain criteria such as the minimum operating income, it has to make it up with larger minimum amounts in other areas such as revenue. This helps to improve the quality of companies listed on the Nasdaq.
Delisting: After a company gets listed on the market, it must maintain certain standards to continue trading. Inability to meet the specifications set out by the stock exchange will result in delisting. Falling below the minimum required share price, or market capitalization, is one of the major factors triggering a delisting.
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