Nasdaq’s new continued listing requirement was automatically stayed on July 29, 2026, after notices of petition were filed. The rule, which would require companies to maintain a minimum Market Value of Listed Securities (MVLS) of at least $5 million, was initially approved by the SEC on July 22.
Although the rule is currently on hold, companies near the proposed threshold should plan ahead by evaluating how the requirement could affect financing, capital planning and exchange-compliance strategies if ultimately implemented. According to the proposal, companies that remain below the $5 million MVLS threshold for 30 consecutive business days would receive a Staff Delisting Determination and be immediately subject to suspension and delisting from Nasdaq.
The Rationale: Market Quality and Investor Protection
The proposed rule aims to address more than a technical listing deficiency. Nasdaq’s view is that sustained low MVLS may indicate impaired market quality, increased manipulation or volatility risk, and an inability to sustain exchange listing.
In its initial approval order, the SEC found the rule consistent with the Exchange Act, including investor-protection, fair-procedure and competition requirements.
Limited Relief Through the Hearings Panel
If implemented, the rule would include a limited amendment to the initial proposal. The Nasdaq Hearings Panel may reverse a Staff Delisting Determination if it determines that Nasdaq staff made an error, or it may grant an exception for up to 180 days from the Staff Delisting Determination for the company to demonstrate that it meets applicable initial listing requirements.
This relief is limited. A hearing request does not prevent the suspension of Nasdaq trading, and Nasdaq stated that suspended securities would generally trade in the over-the-counter (OTC) market while the appeal is pending.
If a Staff Delisting Determination is issued, the company would be required to do more than regain the lower continued listing threshold. To obtain panel relief, it must demonstrate a path to satisfying initial listing requirements, which are generally more demanding than continued listing standards.
Companies Near the Threshold Should Plan Ahead
If the stay is lifted and the rule becomes effective, companies with MVLS below or near $5 million may have limited time to evaluate their options. Early planning can provide greater flexibility than responding after a deficiency occurs.
Key considerations include:
- Monitor MVLS continuously. Companies should track Nasdaq-defined MVLS, in addition to public quote-site market capitalization. Nasdaq’s definition uses the consolidated closing bid price multiplied by the measure to be valued.
- Assess initial listing eligibility. Because any Hearings Panel exception would require compliance with applicable initial listing standards, companies should understand how they compare against those requirements before a deficiency arises.
- Do not rely on a reverse split alone. A reverse split may help with a bid-price deficiency, but it does not by itself increase market value. The requirement would be market-value based, not bid-price-only.
- Firm up capital-raising plans. Potential strategies may include PIPEs, registered directs, strategic investors, industry partners or equity financings tied to credible business milestones. However, because this is a market-value-driven hurdle, a financing viewed as highly dilutive may fail to cure the deficiency if the resulting market-price decline offsets the added capital or shares.
- Review capital structure issues. Debt-to-equity conversions, warrant inducements, preferred-stock restructurings or other recapitalization strategies may be useful where convertible debt, preferred stock, warrants or other overhangs are suppressing market value.
- Consider strategic transactions. Mergers, acquisitions, business combinations, a Digital Asset Treasury strategy or other balance-sheet investment strategies may be considered where they credibly increase sustainable market value. Any such strategy should be evaluated carefully for accounting, securities law, valuation and disclosure implications.
- Prepare for an OTC transition. Because suspended securities would generally trade OTC while an appeal is pending, companies at risk should have a contingency plan for OTC trading, investor communications and financing consequences.
Investor Communications Matter, But Require Substance
Companies near the proposed threshold may need to reassess their investor-relations cadence because the 30-business-day period can move faster than a typical periodic press release cycle.
A communications strategy can help explain legitimate value catalysts, financing milestones, operational progress or balance-sheet improvements, but it does not solve the underlying issue by itself. Companies should avoid promotional activity or communications that could be viewed as market manipulation, particularly given the SEC’s focus on manipulation risk and fair and orderly markets in approving the rule.
IPO and Listing Planning Implications
The proposed rule also matters for companies contemplating an IPO or exchange listing. Companies should not plan merely to meet initial listing standards at the time of listing; they should also build in a post-listing market-value cushion.
For pre-IPO companies, key considerations include:
- Ensure a stable investor base before IPO or bring in a strategic primary investor, such as a private equity or industry partner.
- Factor the proposed listing requirements into the required offering size and post-listing market-value cushion.
- Evaluate which exchange best fits the company’s size, valuation, investor base and expected trading profile.
- Monitor pending NYSE American developments. The NYSE American proposal, as amended, remains pending and is focused on minimum share price; the SEC’s final decision is expected by August 14, 2026, based on NYSE American’s July 15 comment letter.
Preparing for a Potential Nasdaq MVLS Requirement
Although the rule is currently stayed, it reinforces the importance of proactive public-company planning. For companies near the $5 million MVLS threshold, the remediation window would be short and the risk significant. Companies that understand their exposure, evaluate strategic alternatives early and prepare for potential trading disruptions will be better positioned to respond if the rule ultimately moves forward.
Stay Ahead of Evolving Listing Standards with Grassi
Grassi’s SEC & Capital Markets team advises public companies, micro-cap issuers, SPAC sponsors and growth-stage companies through each phase of the public-company lifecycle. From IPO readiness and PCAOB audits to SEC reporting, exchange compliance and capital markets advisory, we help companies evaluate their options and respond proactively as listing standards evolve.
To discuss how the proposed Nasdaq MVLS requirement or pending NYSE American developments may affect your company’s listing strategy, capital plan or reporting obligations, reach out to a Grassi advisor today.
Frequently Asked Questions
What is Nasdaq’s proposed $5 million MVLS rule?
The proposed rule would require companies listed on the Nasdaq Global Select Market, Nasdaq Global Market and Nasdaq Capital Market to maintain MVLS of at least $5 million as a continued listing requirement.
Is Nasdaq’s $5 million MVLS rule currently effective?
No. Although the SEC approved the rule on July 22, 2026, the approval is currently stayed pending further review. As a result, the rule is not currently effective.
What would happen if a company remains below $5 million MVLS?
If the rule becomes effective, a company that remains below the threshold for 30 consecutive business days would receive a Staff Delisting Determination and be immediately subject to suspension and delisting from Nasdaq, without a customary cure period.
Does an appeal prevent Nasdaq trading suspension?
Under the proposal, a hearing request would not stay Nasdaq trading suspension. Nasdaq stated that securities would generally trade OTC while Hearings Panel review is pending.
Can the Hearings Panel grant more time?
Yes, but only in limited circumstances. The panel may reverse a determination if it was in error or grant up to 180 days for the company to demonstrate compliance with applicable initial listing requirements.
Can a reverse split cure an MVLS deficiency?
A reverse split may address a bid-price issue, but it does not by itself increase market value. If the rule goes into effect, companies will generally need a strategy that supports sustainable MVLS above $5 million.
What should companies near the MVLS threshold do now?
Companies should assess how the proposed rule could affect them if the stay is lifted. Considerations include: monitoring MVLS continuously, evaluating financing and strategic alternatives, reviewing capital structure issues, preparing supportable investor communications and developing an OTC transition contingency plan.
Disclaimer: This article is for informational purposes only and is not legal, accounting, tax or investment advice. Consult appropriate advisors regarding your specific facts.
