SEC Approves Nasdaq’s New $5 Million MVLS Continued Listing Requirement

On July 22, the U.S. Securities and Exchange Commission (SEC) issued an order granting approval of Nasdaq’s proposed rule change as modified by Amendment No. 1, to adopt a new continued listing requirement mandating that companies listed on all tiers of the Nasdaq Stock Market maintain a market value of listed securities (MVLS) of at least $5 million. If a company’s MVLS falls below $5 million for 30 consecutive business days, Nasdaq will immediately suspend trading in the company’s securities and initiate delisting proceedings. Unlike with most other continued listing deficiencies, no compliance cure period is available for an MVLS deficiency under the new rule.

Key Takeaways

Immediate Effect. The rule became effective immediately upon the SEC’s approval on July 22 and applies to all companies currently listed on Nasdaq’s Global Select Market, Global Market, and Capital Market tiers. There is no delayed effective date or transition period. For companies whose MVLS is already below $5 million, the 30-consecutive-business-day measurement period began running on July 23.

$5 Million MVLS Floor. Companies must maintain MVLS of at least $5 million. Failure to meet this threshold for 30 consecutive business days triggers a Staff Delisting Determination and immediate suspension from trading.

No Cure Period. Unlike with other continued listing deficiencies, there is no compliance period to regain compliance. A Staff Delisting Determination is issued immediately following the 30-day compliance period.

No Stay on Appeal. A request for a Hearings Panel review will not stay the suspension of trading. Trading of securities will generally move to the OTC market while the appeal is pending.

Limited Hearings Panel Relief. The Hearings Panel may reverse the delisting determination if it is made in error or grant an exception of up to 180 days for the company to demonstrate compliance with all initial listing requirements (not continued listing requirements).

Background

Existing Framework. Under Nasdaq’s existing continued listing rules, companies must satisfy various quantitative and qualitative standards, including minimum bid price, minimum market value, and corporate governance requirements, to maintain their listings. Under the existing framework, companies that fall out of compliance with most continued listing standards are granted a cure period (typically 180 days) to regain compliance before delisting proceedings are initiated.

The New $5 Million MVLS Trigger. The new rule fundamentally departs from this framework. It imposes a market-value floor that will result in immediate suspension and initiation of delisting proceedings after 30 consecutive business days of noncompliance, with no cure period, no stay during appeal, and limited appeal grounds.

Regulatory Context. Nasdaq initially filed the proposal on January 13, and after public comment and SEC proceedings, on June 18 filed Amendment No. 1, which replaced the original filing in its entirety and introduced the Hearings Panel review process described below.

Summary of New Nasdaq Rules

New MVLS Requirement. New Nasdaq Rules 5450(a)(3) and 5550(a)(6) require companies listed on the Nasdaq Global Select Market, Nasdaq Global Market, and Nasdaq Capital Market to maintain an MVLS of at least $5 million. MVLS is calculated under Nasdaq Rule 5005(a)(23), which defines “market value” as the consolidated closing bid price of a security multiplied by the number of shares or units of that security that are listed.

30-Day Trigger. If a company’s MVLS falls below $5 million for 30 consecutive business days, Nasdaq will immediately issue a Staff Delisting Determination. Notably, this is codified as an amendment to Nasdaq Rule 5810(c)(1), which designates this as a new type of deficiency that triggers immediate delisting without a cure or compliance period.

Immediate Trading Suspension. Upon the Staff Delisting Determination, a company’s securities will be suspended from trading on Nasdaq. Unlike with other listing deficiencies, under amended Nasdaq Rule 5815(a)(1)(B)(ii), a timely request for a Hearings Panel review will not stay the suspension. The company’s securities will generally trade in the OTC market while the appeal is pending. As a result, even companies that ultimately prevail before the Hearings Panel will experience a period of trading on the OTC market, which may result in reduced liquidity, lower institutional participation, increased bid-ask spreads, and potential covenant or contractual triggers tied to exchange listing status.

Hearings Panel Review. New Nasdaq Rule 5815(c)(1)(I) provides that the Hearings Panel may:

• Reverse the Staff Delisting Determination if it determines the determination was made in error; or
• Grant an exception for up to 180 days from the date of the Staff Delisting Determination for the company to demonstrate that it meets all requirements for initial listing on Nasdaq (a materially higher standard than the continued listing requirements).
  
  

As initially proposed, the rule would not have permitted the Hearings Panel to grant any exception. While this Hearings Panel exception process was introduced in Amendment No. 1, the requirement to meet initial listing requirements, which are materially higher than the continued listing requirements, likely will not provide a practical path to relisting for the vast majority of companies expected to fall below the $5 million MVLS threshold.

Next Steps

Monitor MVLS. Companies whose MVLS is already below $5 million should take immediate action. Companies near the $5 million MVLS threshold should proactively monitor MVLS on a daily basis and consider strategic alternatives well in advance of approaching the threshold. Nasdaq will determine the number of outstanding shares based on a company’s most recent public filing or figures that have been submitted to Nasdaq on a Change in Outstanding Shares form. Companies whose MVLS is already below $5 million or is near $5 million should notify Nasdaq of all changes in their outstanding shares on a same-day basis.

Audit contractual triggers. Companies should review credit agreements, indentures, and other material contracts for provisions triggered by delisting, suspension of trading, or transfer to the OTC market. Early identification of such provisions is critical to managing exposure.

Prepare strategic alternatives. Evaluate capital raises or business combinations to maintain MVLS above $5 million. Consider reverse stock splits carefully, as they can invite downward pressure on the stock price that reduces MVLS.

Know the relisting bar. If seeking to rely on the Hearings Panel exception, companies must review compliance with the initial listing requirements, including satisfying higher market value, public float, and corporate governance thresholds applicable to new listings.

Engage advisors. Retain capital markets counsel and financial advisors to develop a contingency plan before a breach occurs.

Contact Us

If you have questions regarding the new MVLS continued listing requirement or you need guidance on preparing for an initial or continued listing on Nasdaq, including IPOs, de-SPAC transactions, direct listings, or strategies for maintaining compliance with Nasdaq’s ongoing requirements, please contact a member of our Capital Markets & Securities team. We are available to provide practical, tailored advice to help issuers, investment banks, and other market participants navigate the evolving regulatory landscape.

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