Nasdaq Proposes Stricter Listing Rules for Small IPOs and Chinese Firms
Nasdaq Inc. has proposed new listing standards to address concerns over extreme price volatility in small-cap stocks and improve market liquidity. Key changes include increasing the minimum public float requirement to $15 million for companies listing under the net income standard, implementing faster delisting procedures for companies with market values below $5 million, and requiring new Chinese company listings to raise at least $25 million in public offering proceeds. The proposal aims to tackle recent instances of extreme market volatility and is subject to SEC approval.
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Nasdaq Inc., the global technology company operating stock exchanges and other financial services, has put forward a proposal for new listing standards aimed at addressing concerns over extreme price volatility in small-cap stocks and improving market liquidity. The proposed changes come in response to recent volatile trading patterns observed in the market.
Key Changes in the Proposal
Increased Minimum Public Float Requirement: Companies seeking to list under the net income standard would need to meet a higher minimum public float requirement of $15.00 million, up from the current $5.00 million.
Accelerated Delisting Procedures: The proposal includes faster delisting procedures for companies with market values below $5.00 million, aiming to maintain the integrity of the exchange.
Stricter Rules for Chinese Firms: New listings of Chinese companies would be required to raise at least $25.00 million in public offering proceeds.
Addressing Market Volatility
The proposed rules are a response to recent instances of extreme market volatility. Notable examples include:
- Regencell Bioscience Holdings Ltd., which experienced a staggering 82,000% surge before retreating.
- Pheton Holdings Ltd., which lost 90% of its value within minutes of trading.
These volatile trading patterns have raised concerns about potential pump-and-dump schemes and overall market stability.
Impact on Chinese Listings
The proposal comes at a time when Chinese companies maintain a significant presence on major U.S. exchanges:
- Over 280 Chinese companies are currently listed on major U.S. exchanges.
- The total market capitalization of these companies amounts to $1.10 trillion.
- The average proceeds from Chinese IPOs have seen a substantial decrease, dropping from over $300.00 million in 2021 to $50.00 million.
Next Steps
The proposed rules are subject to approval by the U.S. Securities and Exchange Commission (SEC). If approved, these changes could significantly impact the landscape for small-cap IPOs and Chinese company listings on the Nasdaq exchange.
Nasdaq's initiative reflects ongoing efforts by U.S. exchanges to balance the opportunities for company listings with the need to protect investors and maintain market integrity. As the proposal moves through the regulatory process, market participants will be closely watching its potential effects on future listings and overall market dynamics.
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