NASDAQ Listing Requirements
The Nasdaq is the world's first and largest "electronic" stock market -- meaning that it has no trading floor like the New York Stock Exchange. Home to both emerging companies and such giants as Microsoft and Intel, the Nasdaq has tight requirements for companies hoping to add their stocks, but looser rules to remain listed.
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Requirements
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Every new company that wants to list its stock on the Nasdaq -- technically the "Nasdaq Global Select Market" -- must meet four criteria related to the number and value of available shares. It also must demonstrate that its finances conform to at least one of four "listing standards." Once a company is on the Nasdaq, it must meet "listing rules" to stay there.
Initial Listing
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These four criteria apply to all companies joining the Nasdaq: First, it must have 1.25 million shares available for public trading; this doesn't include shares held by company officers or any company owner who has more than 10 percent of all shares. Second, the stock's current "bid price" -- the price to buy -- must meet a Nasdaq-specified minimum; as of 2010, that minimum was $4. Third, the company must have a diversified shareholder base, defined one of three ways: at least 2,200 total shareholders; at least 450 "round lot" shareholders, meaning people with at least 100 shares apiece; or 550 total shareholders and an average monthly trading volume of 1.1 million shares. Fourth, the stock must have at least three "market makers" -- brokerages or investment banks that are always able to buy and sell the stock for the current listed share price.
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Listing Standards
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To join the Nasdaq, a company must meet all conditions of one of these four standards: Standard No. 1: total pre-tax earnings of at least $11 million over the previous three years, including at least $2.2 million in each of the past two years and no year with a loss. Standard No. 2: total cash flow of $27.5 million over the previous three years; no net losses of cash in any of those years; an average market capitalization -- the total value of all shares -- of at least $550 million over the preceding 12 months; and revenue of at least $110 million in the most recent full fiscal year. Standard No. 3: average market capitalization of $850 million over the preceding 12 months and revenue of at least $90 million in the most recent full fiscal year. Standard No. 4: current market capitalization of at least $160 million; total assets of at least $80 million in the most recent fiscal year; and at least $55 million in "stockholder equity" -- that is, the total value of all the stock minus the value of the company's assets.
Continued Listing
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To remain listed, a company's share price must remain above $1, and it must always have at least 400 total shareholders. It must also meet all the conditions of one of three "listing rules": Rule No. 1: at least 750,000 shares held by the public -- that is, not held by officers or 10 percent owners; a total value of publicly held shares of at least $5 million; and stockholder equity of all shares, publicly held or not, of $10 million. Rule No. 2: at least 1.1 million shares held by the public; a total value of publicly held shares of at least $15 million; and a total market value of $50 million for all securities, publicly held or not. Rule No. 3: at least 1.1 million shares held by the public; a total value of publicly held shares of at least $15 million; and revenue and assets of more than $50 million each in the latest fiscal year or two of the three past fiscal years.
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