Paul Horton: Stock Markets and Listing Requirements

There are numerous national and regional markets where securities are bought and sold. The three major markets in the U.S. are the NASDAQ National Market, the New York Stock Exchange and the American Stock Exchange.

In order to have shares of your company bought and sold in these markets, your company must meet their listing requirements. The general listing requirements for each of these markets are as follows:

NASDAQ National Market (NASDAQ)

The NASDAQ National Market imposes minimum bid price, quantitative and other criteria in determining whether a company will be permitted to list its stock on the NASDAQ.

Initial Minimum Bid Price for Stock: The stock must have a minimum initial bid price of $5.00, and must later remain at or above $1.00. This requirement serves as a safeguard against certain market activities associated with low-priced securities, and protects the credibility of the NASDAQ market.
Quantitative Requirements: To be listed on the NASDAQ National Market, a company must have net tangible assets of $6 million and net income in the latest fiscal year or two of the past three fiscal years of $1 million. In addition, these companies must have a public float of $1.1 million, a market value of the public float of $8 million, a minimum of 400 shareholders, and at least three market makers.
Capitalization Alternative: Companies that do not meet the quantitative requirements may nevertheless be listed on NASDAQ if they have a market capitalization of $75 million or total assets of $75 million and total revenues of $75 million, an initial minimum bid price of $5.00, and meet certain other requirements.
Peer Review Requirement: The practices of all independent auditors for companies listed on the NASDAQ are subject to monitoring under a peer review system. Also, the quality control systems of accounting firms of NASDAQ-listed companies are reviewed by peers every three years.

NASDAQ SmallCap Market Listing Requirements

Small capitalization companies can be listed on the NASDAQ SmallCap Market if they have either:

Net tangible assets of $4 million,
$50 million market capitalization, or
Net income in the latest fiscal year or two of the past three fiscal years of $750,000.

In addition, these companies must have a public float of $1 million, a market value of the public float of $5 million, a minimum of 300 shareholders, and at least three market makers. Also, these companies must have an operating history of at least one year or $50 million market capitalization. The initial minimum bid price is $4.00 and the same ongoing minimum bid price and peer review requirements as are set forth above apply.

New York Stock Exchange (NYSE)

The New York Stock Exchange imposes minimum quantitative standards relating to distribution and size criteria and financial criteria.

Distribution and Size Criteria: To be traded on the NYSExchange, a company must meet certain requirements as to the number of shareholders, must have a market value of public shares of $100 million or an IPO market value of $60 million.
Financial Criteria: The company must have pretax earnings of $4.5 million in the most recent year or $6.5 over the past three years, operating cash flow of $25 million aggregate over the past three years or revenues of $250 million for the most recent year. Other factors are considered as well, and the NYSE has broad discretion regarding the listing of a company.

American Stock Exchange (AMEX)

Regular Financial Guidelines: The American Stock Exchange requires pre-tax income of $750,000 for most recent fiscal year or two out of the most three recent fiscal years, a market value of public float of $3 million, an initial minimum bid price of $3 and stockholder’s equity of $4 million. There are no operating history requirements under the regular financial guidelines.
Alternate Financial Guidelines: The American Stock Exchange also permits listing under its Alternate Financial Guidelines, provided a company has a market value of public float of $15 million, an initial minimum bid price of $3 and stockholder’s equity of $4 million. The company must have a three-year operating history under this guideline, but there are no pre-tax income requirements.

Note: Under either the Regular Financial Guidelines or under the Alternate Financial Guidelines, there are alternative additional requirements as to public float, number of stockholders, and average daily trading volume.

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