Key Takeaways
- Nasdaq Capital Market targets small-cap companies.
- Lower listing requirements than Nasdaq Global tiers.
- Requires minimum $4-5M equity or $15M market value.
- Supports emerging growth with enhanced visibility.
What is Nasdaq Capital Market?
The Nasdaq Capital Market is a tier within Nasdaq's three-market system designed for small-cap companies aiming to enhance their visibility and liquidity compared to over-the-counter markets. It offers a platform for emerging firms that meet specific financial and listing requirements set by the SEC.
This market tier supports companies typically valued under $1 billion, providing an opportunity to access public capital while maintaining less stringent criteria than Nasdaq's Global Market tiers.
Key Characteristics
The Nasdaq Capital Market focuses on facilitating growth-stage companies with manageable listing standards. Key features include:
- Financial Standards: Companies must meet one of three financial tests—Equity, Market Value of Listed Securities, or Net Income—to qualify for listing.
- Minimum Bid Price: A minimum bid price of $4 per share is required, with some flexibility under penny stock provisions.
- Public Float and Shareholders: At least 1 million publicly held unrestricted shares and a minimum of 400 round lot holders are needed.
- Market Makers: A minimum of 3 registered market makers must actively support trading.
- Listing Fees: Includes a $5,000 non-refundable application fee plus entry fees based on shares outstanding.
How It Works
To list on the Nasdaq Capital Market, your company must first satisfy general eligibility rules under Rule 5505(a) and choose one of the financial standards to demonstrate viability. This process ensures your firm has sufficient equity, market value, or income to meet Nasdaq's requirements.
Once listed, maintaining compliance involves meeting ongoing criteria like maintaining a minimum $1 bid price and adequate public float. Failure to meet these standards may lead to delisting, but Nasdaq often provides cure periods to regain compliance.
Examples and Use Cases
Many small-cap companies utilize the Nasdaq Capital Market to gain investor access while preparing to uplist to higher tiers. Examples include:
- Biotech startups: Emerging firms with strong earnings potential but limited operating history frequently choose this market.
- Growth companies: Firms featured in best growth stocks guides often begin here to build liquidity and market presence.
- Airlines: Companies like Delta initially accessed capital markets through smaller tiers before expanding.
- Small-cap investments: Investors interested in the best small-cap stocks often monitor companies listed on this market for early opportunities.
Important Considerations
Before pursuing a Nasdaq Capital Market listing, evaluate whether your company can consistently meet listing and continued compliance requirements, including financial thresholds and trading volume standards. Understanding these can help avoid costly delisting risks.
Additionally, considering your firm’s structure—such as whether it is a C corporation—and broader macroeconomics trends can influence your timing and strategy for listing on this market.
Final Words
The Nasdaq Capital Market offers small-cap companies a viable platform with manageable listing requirements to boost visibility and liquidity. Evaluate your company's financials against its standards to determine eligibility and plan your listing strategy accordingly.
Frequently Asked Questions
The Nasdaq Capital Market is an entry-level tier within Nasdaq's three-market structure, designed mainly for small-cap companies seeking more visibility, liquidity, and credibility compared to over-the-counter markets. It targets emerging growth companies with market values typically under $1 billion.
To list on the Nasdaq Capital Market, companies must meet all general requirements plus at least one of three financial standards related to equity, market value of listed securities, or net income. Key criteria include a minimum bid price of $4 per share, at least 1 million publicly held shares, 400 round lot holders, and at least three active market makers.
Small-cap and emerging growth companies with market values typically under $1 billion are eligible, provided they meet Nasdaq’s financial and shareholder requirements. The market is suitable for firms seeking an upgrade from OTC markets but not yet ready for Nasdaq's higher tiers.
Companies must satisfy one of three financial standards: Equity (minimum $5 million stockholders' equity and two years operating history), Market Value of Listed Securities (at least $50 million market value), or Net Income (minimum $750,000 net income in the latest fiscal year or two of the last three, plus $4 million equity).
Yes, IPOs must have a firm commitment underwritten offering with at least $15 million in gross proceeds. They also have slightly different shareholder and market value requirements compared to uplistings or existing companies.
A company must have at least 400 round lot holders (300 for IPOs), with minimum unrestricted holdings per shareholder, and at least three registered and active market makers to ensure liquidity and market interest.
For OTC uplistings, companies need a minimum average daily trading volume of 2,000 shares over 30 trading days. This ensures sufficient liquidity when moving from OTC to Nasdaq Capital Market.
Direct listings are restricted on the Nasdaq Capital Market and must meet heightened standards. Companies from certain restrictive markets or those not meeting specific criteria cannot pursue direct listings at this tier.
