Nasdaq Proposes US$5 Million Market Value Continued Listing Requirement

In the latest of a series of moves to tighten listing standards for small issuers, The Nasdaq Stock Market LLC (“Nasdaq”) proposed on January 13, 2026, to adopt a new continued listing requirement where companies must maintain a market value of at least US$5 million. Under the proposal, securities of companies that do not satisfy the market value minimum would immediately have their trading suspended and be delisted, with no cure period or appeal available except to challenge errors in the initial suspension determination. The proposal reflects Nasdaq’s position that companies with a market value below US$5 million are likely facing challenges too severe to recover from and sustain compliance thereafter. This proposal, alongside other recent regulatory initiatives, creates an increasingly stringent environment for microcap companies seeking to maintain public listings or complete IPOs.

Background and Rationale

As described in its rule proposal, Nasdaq believes that once the market values a company’s securities below US$5 million, that company is no longer appropriate for continued listing and trading on Nasdaq, for two primary reasons:

• The challenges facing such companies, generally, are not temporary and may be so severe that the company is not likely to regain and sustain compliance.
• It is more difficult for market makers to make markets in these securities and for there to be a fair and orderly market.

In general, where Nasdaq rules contain minimum requirements for companies to remain listed, the rules provide compliance periods for companies that fail to maintain compliance for a period of time. These opportunities to cure compliance failures are designed for companies facing temporary business issues, a temporary decrease in the value of their securities, or temporary market conditions. However, Nasdaq has observed that once companies in financial distress or experiencing a prolonged operational downturn have been identified by the market and lost investor interest to the point that their market value drops below US$5 million, challenges are generally not temporary, and they are unable to regain compliance with the listing requirements for the long term.

Proposed Rule Changes

New Continued Listing Requirement

Nasdaq proposes to adopt Listing Rules 5450(a)(3) and 5550(a)(6) to require companies listed on the Nasdaq Global and Capital Markets, respectively, to maintain a minimum Market Value of Listed Securities (MVLS) of at least US$5 million.¹ Nasdaq further proposes to modify Listing Rule 5810(c)(1) to add an additional type of deficiency that results in immediate delisting and suspension from trading of the company's securities. Specifically, Listing Rule 5810(c)(1) would provide that the staff's delisting notice would inform the company that its securities are immediately subject to suspension and delisting when it fails to maintain a MVLS of at least US$5 million for a period of 30 consecutive business days.

This proposal is similar to that made by NYSE American LLC in November 2024,² except that failure to meet Nasdaq's new requirement is triggered after 30 consecutive business days, whereas NYSE American LLC’s proposal uses a 30 trading-day average.

No Cure or Compliance Period

Listing Rule 5810(c)(3) currently identifies deficiencies for which the rules provide a specified cure or compliance period. Nasdaq proposes to modify Listing Rule 5810(c)(3) to exclude companies failing to meet the MVLS requirement of at least US$5 million from any cure or compliance period.

No Stay of Suspension During Appeal

Nasdaq proposes to modify Listing Rule 5810(c)(1) to provide that staff's delisting notice in these circumstances will inform the company that its securities are immediately subject to suspension from trading on Nasdaq. Once the company is issued a Staff Delisting Determination under Rule 5810 with respect to that security, the decision can be appealed to a Nasdaq Listing Qualifications Hearings Panel (a “Hearings Panel”). However, Nasdaq believes that it is not appropriate for such a company to continue trading on Nasdaq during the pendency of the Hearings Panel review process, given what it calls “the difficulties with maintaining fair and orderly markets in such low value companies.”

As such, Nasdaq proposes to adopt Listing Rule 5815(a)(1)(B)(ii)f. to provide that, notwithstanding the general rule that a timely request for a hearing ordinarily stays the suspension and delisting action pending a written panel decision, a request for a hearing in these circumstances does not stay the suspension of the securities from trading. A company that is suspended under the proposed rule could appeal the Staff Delisting Determination to a Hearings Panel, but its securities would generally trade in the over-the-counter market while that appeal is pending.

Limited Hearings Panel Discretion (Updated)

Listing Rule 5815(c) sets forth the scope of the Hearings Panel's discretion and provides that when the Hearings Panel review is of a deficiency related to continued listing standards, in most cases the Hearings Panel may, where it deems appropriate, grant an exception to the continued listing standards for a period not to exceed 180 days, and find that the company has regained compliance with all applicable listing standards.

As originally proposed in January 2026, Nasdaq would have amended Listing Rule 5815(c)(1)(H) to provide that in the case of a company that received a Staff Delisting Determination notice due to a failure to maintain MVLS of at least US$5 million, the Hearings Panel could only reverse a delisting decision where it determines that the Staff Delisting Determination letter was in error and the company never failed to satisfy the applicable requirement. By contrast, the Hearings Panel could not have considered facts indicating that the company had regained compliance, nor could the Hearings Panel have granted an exception allowing the company additional time to regain compliance.

In an amended proposal filed with the SEC on June 18, 2026, which the SEC made public on June 22, 2026, Nasdaq acknowledged the position taken by commenters on the original proposal that some companies with a low market capitalization may meaningfully recover and that their continued listing on the exchange may therefore be appropriate.

Accordingly, Nasdaq proposes to adopt new Listing Rule 5815(c)(1)(I) to provide that in the case of a company that receives a Staff Delisting Determination due to a failure to maintain MVLS of at least US$5 million, the Hearings Panel may, where it deems appropriate, grant an exception for a period not to exceed 180 days from the Staff Delisting Determination for the company to demonstrate that it meets all requirements for initial listing, not merely the continued listing requirements. Nasdaq believes that requiring companies in these circumstances to satisfy the initial listing requirements, which are higher than the continued listing requirements, will provide a level of certainty that the company will not immediately fall out of compliance with the proposed US$5 million requirement or any other requirement for continued listing.

Effective Date

The amended proposal is not a notice of filing and immediate effectiveness. Comments on the amended proposal are due 15 days after publication in the Federal Register.

Conclusion

The proposed rule change represents a significant enhancement to Nasdaq's continued listing requirements, designed to protect investors by promptly removing companies with sustained very low market values. Unlike other listing deficiencies that provide compliance periods and broad appeal rights, this new requirement will result in immediate suspension and delisting after 30 consecutive business days of non-compliance, with no cure period, no stay during appeal and limited appeal grounds.

The rule proposal follows other recent moves by Nasdaq to enhance its listing standards, including a December 2025 rule granting Nasdaq discretion to deny initial listing to companies if, in Nasdaq's judgment, the company's securities could be susceptible to manipulative trading activity, and proposals made in September 2025 adding other initial and continued listing standards based on MVLS.³

As for the amended proposal’s expansion of Hearing Panel discretion and notwithstanding Nasdaq's characterization of the 180-day exception as relief for companies whose difficulties are temporary or externally caused, the practical benefit of the new exception is limited. A company whose securities have been suspended from Nasdaq but continue to trade in the over-the-counter market may independently apply for initial listing on Nasdaq at any time upon satisfying Nasdaq's initial listing criteria, even without invoking the Hearings Panel exception. The marginal advantages of the exception are procedural in nature: reinstatement through the exception may be faster than a new initial listing application, and formal listing status is technically preserved during the pendency of the appeal rather than extinguished by a formal delisting. However, these procedural distinctions may not constitute the type of meaningful relief that commenters called for. For the vast majority of companies that fall below the $5 million MVLS threshold, the practical outcome under the amended proposal is not significantly changed from the original proposal.

Update (May 4, 2026): SEC Issues Order Instituting Proceedings to Determine Whether to Approve Proposal

On April 28, 2026, the SEC issued an order instituting proceedings to determine whether to approve or disapprove Nasdaq’s proposal (the “Order”). According to the Order, the proposal raised significant concerns from commenters, including the following:

• Lack of empirical support: Several commenters stated that the proposal does not provide empirical evidence supporting the US$5 million threshold. One commenter cited an empirical study suggesting that the proposal may prematurely delist firms that would otherwise regain compliance, noting that many firms that previously fell below the US$5 million threshold for 30 consecutive business days ultimately recovered.
• Overlap with existing rules: Several commenters stated that the proposal overlaps with recently adopted continued listing rules, such as reverse stock split and bid price requirements, which are already designed to address the same low-valuation risk factors.
• Failure to account for temporary or sector-specific factors: Several commenters stated that the proposed US$5 million threshold fails to consider sector-specific and situational factors that may result in temporary declines in a company's valuation unrelated to its actual financial health.
• Negative impact on capital formation: Several commenters stated that the proposal would impair issuers' ability to raise capital or obtain debt financing due to heightened delisting risk, with lenders potentially demanding more restrictive covenants, higher pricing, or additional collateral.
• Risk of manipulative trading: Several commenters stated that a rigid US$5 million threshold, coupled with automatic suspension after 30 consecutive business days, could increase the potential for manipulative trading and market abuse in an effort to drive down the value of a company's stock and cause it to be delisted.
• Concerns about due process: One commenter stated that the proposal’s denial of an automatic stay of suspension pending Hearings Panel review renders appeal rights "largely illusory" and that a stay pending appeal is "a fundamental safeguard that ensures listed companies receive meaningful review before suffering the severe consequences of delisting." The same commenter argued that restricting the Hearings Panel's discretion reduces it to a "ministerial function."

In light of these concerns, the SEC is instituting proceedings to determine whether the proposal should be approved or disapproved. The Order notes that the institution of proceedings does not indicate that the SEC has reached any conclusions on the issues involved.

Update (June 25, 2026): Nasdaq Files Amendment to Proposed Rule Change

Notwithstanding the expanded Hearings Panel discretion discussed above, Nasdaq has retained the other core elements of the original proposal:

• Immediate suspension and delisting: Companies will continue to be subject to immediate suspension and delisting if they maintain MVLS of less than US$5 million for 30 consecutive business days.
• No cure or compliance period: Nasdaq maintains that providing a cure period is not appropriate, noting that delisting is triggered "only after an issuer remains below the minimum MVLS threshold for 30 consecutive business days, which is itself a meaningful persistence requirement," and that "an additional cure period would unnecessarily prolong" the heightened risks of manipulation, investor confusion, and diminished market quality that arise once that condition is met.
• No stay of suspension during appeal: Nasdaq maintains that immediate suspension from trading for a company that has failed to maintain the US$5 million MVLS threshold over 30 consecutive business days is appropriate, and that a company's securities should remain suspended during the pendency of any Hearings Panel review. A company that fails to satisfy the proposed US$5 million MVLS rule may appeal the Staff Delisting Determination to a Hearings Panel, but its securities would generally trade in the over-the-counter market while that appeal is pending.

In response to comments arguing that a more targeted, risk-based approach focused on specific issuer characteristics would be more precise than a blanket market-value trigger, Nasdaq responded in the amended proposal that low MVLS is itself a defining characteristic of susceptibility to manipulation, given that less capital may be required to exert meaningful control over such a security's price.

With respect to concerns that the US$5 million threshold, coupled with automatic suspension after 30 consecutive business days, could increase the potential for manipulative trading in an effort to drive down a company's stock price, Nasdaq noted that market manipulation is illegal and that commenters opposing the proposal provided no actual evidence of the activities they speculated would occur.

As to arguments that MVLS is an unreliable indicator because it is affected by factors outside a company's control, Nasdaq noted that the SEC itself has recognized that the primary driver of a stock's price decline is the quality of the company itself, and that a Hearings Panel's ability to allow a company an exception of up to 180 days to demonstrate compliance with the initial listing requirements adequately addresses those instances where a company's difficulties are, in fact, temporary or caused by other factors.

With respect to concerns that the proposal will make it more difficult for affected companies to raise capital, Nasdaq acknowledged that its listing rules are designed to promote capital formation, but argued that the proposal appropriately balances that goal against investor protection by setting a transparent threshold where sustained trading below that threshold results in suspension and delisting.