Approved, Then Stayed: Nasdaq’s New $5 Million Market Value Continued Listing Requirement

However, on July 29, the SEC stayed the approval order pending its review. The rule will not take effect unless and until the stay is lifted. 

The MVLS Requirement

Under new Nasdaq Rules 5450(a)(3) and 5550(a)(6), companies must maintain an MVLS of at least $5 million, calculated as the consolidated closing bid price multiplied by shares outstanding. A company falling below this threshold for 30 consecutive business days will receive a Staff Delisting Determination and face immediate suspension.

Unlike other Nasdaq listing deficiencies (such as the $1.00 minimum bid price requirement, which provides a compliance period), companies that breach the MVLS threshold will not receive any cure or compliance period. This is a significant departure from the typical Nasdaq delisting framework, in which companies are typically afforded time to regain compliance.

No Stay of Suspension Pending Appeal

A request for Hearings Panel review will not stay the suspension of a company’s securities. While companies may appeal, their securities will generally trade in the OTC market during the appeal rather than remaining on Nasdaq.

Hearings Panel Review and Exception Period

Following opposition during the comment period, Nasdaq amended the rule to allow the Hearings Panel to grant a 180-day exception for companies to demonstrate compliance with Nasdaq’s initial listing requirements (not merely continued listing requirements). The Panel may also reverse a delisting if the Staff Delisting Determination was in error.

To regain listing, companies must meet the higher initial listing standards. For example, the minimum bid price for initial listing is $4, compared to $1 for continued listing. Companies may also appeal a Hearings Panel decision to the Nasdaq Listing and Hearing Review Council.

The Commission’s Analysis

The SEC conducted its own empirical analysis of stock price and delisting data as part of its review. The analysis showed that the number of issuers that would have failed to comply with the MVLS threshold increased from two in 2021 to 140 in 2023, declining to 122 in 2024 and 91 in 2025, but remaining well above historical norms. The data also showed limited recovery prospects: 65% of affected issuers remained below $5 million after 180 days, with a median valuation under $3.7 million, and most were eventually delisted for other quantitative deficiencies.

Key Concerns Raised During the Comment Period

The rule generated substantial commentary, with notable opposition from small-cap companies, their counsel, and advocacy groups. Commenters raised concerns that the rigid $5 million threshold would disproportionately burden emerging and small-cap companies, as well as tightly held companies, that may experience volatile market conditions causing temporary declines in MVLS. Several commenters also argued that the bright-line threshold could incentivize short selling activity designed to push a company’s market value below the threshold.

An empirical study submitted by the Small Public Company Coalition found that 78% of the 816 companies that fell below $5 million for 30 days between 2006 and 2025 eventually recovered, and 45% remain listed today, representing over $22 billion in market capitalization.

Commenters also argued that the rule could make capital raising more difficult for small companies and may incentivize issuers to seek listing on less regulated venues or rely more heavily on private capital markets. Despite these concerns, the SEC concluded the rule is reasonably designed to prevent fraudulent and manipulative acts and practices and to protect investors.

Implications for Market Participants

If implemented, the rule would represent a significant tightening of Nasdaq’s continued listing standards. Companies with an MVLS approaching $5 million should monitor their market capitalization closely and consider proactive measures, including capital raises, strategic transactions, or other alternatives, to maintain compliance.

Delisted companies would generally trade in the OTC market and could re-apply for Nasdaq listing if they meet initial listing requirements. The 180-day Hearings Panel exception offers a limited but meaningful avenue for companies experiencing temporary declines in MVLS to demonstrate compliance with initial listing standards, though meeting those standards while trading in the less liquid OTC market may prove challenging in practice.

Update: Approval Order Stayed Pending Commission Review

On July 29, the SEC stayed the approval order after receiving notices of intention to petition for review. Under Rule 431(e) of the SEC’s Rules of Practice, the rule is stayed until the SEC orders otherwise. The SEC has the power to lift the stay from and after seven days following its issuance.

The stay introduces uncertainty as to whether, and in what form, the rule will ultimately be implemented. Companies and their advisors should continue to monitor developments as the SEC considers the petitions for review. We will provide updates as the matter progresses.

Key Takeaways

• The MVLS Requirement: All Nasdaq-listed companies must maintain a minimum MVLS of $5 million; falling below this threshold for 30 consecutive business days triggers immediate suspension and delisting.
• No Cure Period: Unlike other Nasdaq listing deficiencies, there is no compliance period before delisting, and no stay of suspension pending appeal.
• Panel Exception: Companies may seek a 180-day exception to demonstrate compliance with initial listing standards (not merely continued listing standards).
• The SEC Analysis: The SEC’s empirical data showed a sharp rise in affected issuers and limited recovery prospects for companies falling below the threshold.
• Comment Period Opposition: Commenters raised concerns about burdens on small-cap issuers, potential for manipulation, and capital formation impacts.
• Current Status: The approval order has been stayed pending SEC review; the rule will not take effect unless and until the stay is lifted.

ArentFox Schiff attorneys are available to answer your questions and help you assess the impact of the MVLS rule on your company’s listing status. Please contact the authors or your AFS attorney for more information.