In order to be eligible for a major stock exchange like Nasdaq, a company has to be in line with certain listing requirements. Companies who have been run well, have steady revenue, larger market caps and strong cash flow are the companies that make it onto a public stock exchange like Nasdaq. Let’s take a look at what a company needs to do to achieve the requirements. (1)U.S. Securities and Exchange Commission (SEC)."Marketplace Rules, Listing Requirements for Nasdaq Securities."
Listing requirements: what companies need to adhere to
So, in order to have a company listed on a reputable market like Nasdaq, the company needs to fulfil at least 1 of 4 listing requirements. Firstly, a company needs to at least have a $4 bid price value for its stock. In addition to this, the company needs to have at least 3 market makers for its stock. (2)Nasdaq."Initial Listing Guide,"
At the end of the day, companies will need to pay significant fees based on factors like the size of the company and the type of security that they are listing on the public market. Depending on these variables the company could be made to pay an application fee ranging from $5,000 to $25,000. The companies will then need to pay an additional fee based on the number of shares that they have issued. This fee can range between $100,000 and $150,000.
A company will need to achieve certain minimum requirements when it comes to shareholders and the number of publicly traded shares as well. For instance, a company will need to have a minimum of 1,250,000 publicly traded shares listed, at least 450 round lot shareholders, 2,200 total shareholders or 550 shareholders with 1.1 million average trading volume over a period of no less than 12 months.
Additional financial standards
Aside from the above requirements we touched on, companies need to meet other certain financial standards as well.
No.1: Earnings
In order to be considered for a major exchange like Nasdaq, companies will need to have achieved pre-tax earnings of at least $11 million in the last 3 years, $2.2 million in the last 2 years and at no point in those years could they have ended with a net loss.
No.2: Cash flow
In the previous 3 years of the company, there needs to have been a minimum cash flow of at least $27.5 million and at no point could there have been a negative cash flow. Total revenue over the past year needs to hit a minimum of $110 and the market capitalization of the company over the past 12 months needs to be at the minimum, $550 million.
No.3: Total assets
A company can earn leeway on their overall cash flow and market capitalization, provided they achieve a certain level of asset value. Cash flow requirements can be cut down to $160 million if a company’s total asset value amounts to at least $80 million.
No.4: Total capital
Another way to remove the overall cash flow requirements for a company is by having solid market capitalization over a 12 month period. If a company hits at least $850 million in market cap over 12 months and their revenues for the year at least $90 million, their cash flow requirements are removed entirely.
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