SEC Approves Nasdaq Rule Establishing New $5 Million Market Value of Listed Securities Requirement for Continued Listing

Jul 27

Overview

Nasdaq has spent the better part of the last five years narrowing the path for small, thinly traded companies to remain on its markets, and on July 22, 2026, that campaign reached its sharpest point yet. The Securities and Exchange Commission (the “Commission”) approved a proposed rule change filed by The Nasdaq Stock Market LLC (“Nasdaq”), adopting a new continued listing requirement. Under the new rule, companies listed on the Nasdaq Global Select Market, Nasdaq Global Market, and Nasdaq Capital Market must maintain a minimum Market Value of Listed Securities (“MVLS”) of at least $5 million on a continued-listing basis (the “MVLS Requirement”). What sets this rule apart from the usual continued listing framework is not the threshold itself, but the penalty for missing it: a sustained failure to satisfy the MVLS Requirement now results in immediate suspension and delisting, with no cure or compliance period, and an appeal to Nasdaq’s Hearings Panel will not stay the suspension.

For issuers, boards, and investors accustomed to Nasdaq’s more forgiving deficiency framework, with its 180-day grace periods, extensions, and multiple opportunities to regain compliance, this is a meaningfully different regime. Below we walk through how the rule came about, what it actually requires, and what it is likely to mean in practice for companies operating near the threshold.

We urge all of our clients who may be affected by this to proactively talk to us here at Crone about important steps that may be taken to plan for and protect against the outcomes of this major change in the Nasdaq listing landscape. We are standing by to assist.

Why Now: The Road to the MVLS Requirement

The rule did not appear overnight. Nasdaq first floated the proposal in January 2026, and the Commission took the relatively unusual step in April of instituting formal proceedings to decide whether to approve or reject it. Nasdaq revised the proposal in June 2026, primarily to give its Hearings Panel somewhat broader discretion on appeal, and the Commission approved the amended version in July.

The rule’s underlying rationale is straightforward: Nasdaq and the Commission treat a low stock price as a curable problem, since companies can often resolve it quickly through a reverse split. A market value below $5 million is treated differently. Rather than a temporary condition, it is viewed as a structural indicator that the company can no longer sustain a viable trading market. On that view, an extended compliance period would not meaningfully change the outcome; it would simply delay a listing that is, in substance, already unsustainable.

This rule also fits a broader pattern. It is one of several steps Nasdaq has taken in recent years to tighten continued listing standards for small and micro-cap issuers, following a period in which the number of non-compliant issuers rose sharply, from a small handful earlier in the decade to well over a hundred at the peak, and has remained elevated since despite some decline from that high. Viewed in that context, the MVLS Requirement is less an isolated technical fix than the latest, and most severe, step in a sustained effort to move persistently low-value companies off Nasdaq’s markets rather than allow them to remain listed in a non-compliant state.

Key Provisions of the New Rule

New MVLS Threshold

Threshold: Under amended Nasdaq Rules 5450(a)(3) and 5550(a)(6), companies listed on the Nasdaq Global Select Market, Nasdaq Global Market and Nasdaq Capital Market must maintain an MVLS of at least $5 million, calculated as closing bid price multiplied by shares outstanding, aggregated across share classes.

Immediate Suspension and Delisting

No cure period: Under amended Nasdaq Rule 5810(c)(1), a company that fails to maintain the $5 million MVLS threshold for 30 consecutive business days will receive a Staff Delisting Determination, and its securities will be immediately subject to suspension and delisting under amended Nasdaq Rule 5810(c)(3)(C), with no cure or compliance period available.

No Automatic Stay Pending Appeal

Trading pending appeal: Under amended Nasdaq Rule 5815(a)(1)(B), a timely request for Hearings Panel review will not stay the suspension of trading where the deficiency relates to the MVLS Requirement. The company’s securities will generally trade in the over-the-counter (“OTC”) market pending the Hearings Panel’s written decision.

Hearings Panel Exception

Available relief: Under new Nasdaq Rule 5815(c)(1)(I), the Hearings Panel may (a) reverse the delisting decision if it finds the Staff Delisting Determination was issued in error, or (b) grant an exception of up to 180 days from the Staff Delisting Determination for the company to demonstrate that it satisfies all requirements for initial listing, which are generally higher than continued listing standards.

What This Means for the Market

The practical effect will likely show up quickly. Because the 30-business-day countdown has presumably already been running informally for companies that were trading below $5 million when the rule took effect, the first wave of Staff Delisting Determinations under this framework could begin to surface within a matter of months. Companies hovering near the threshold no longer have the luxury of treating a dip below $5 million as a routine deficiency letter to be dealt with later. By the time Nasdaq staff issues a determination, the clock has effectively already run out.

The rule also changes the economics of an appeal. Under the ordinary continued listing framework, a Hearings Panel request buys a company real time and, often, continued trading on Nasdaq while the matter is considered. Here, the securities are expected to move to the OTC market for the duration of any appeal, and the Panel’s authority is narrow. It can find that Staff made an error, or grant extra time to meet Nasdaq’s tougher initial listing standards, but it cannot simply extend the clock on the existing deficiency the way it might for a bid-price or equity problem. For a company that depends on Nasdaq-level liquidity, analyst coverage, or index eligibility to raise capital, even a temporary shift to the OTC market during an appeal can be damaging in its own right, independent of how the appeal is ultimately resolved.

There is also a market-structure dimension worth flagging for clients. The rule is explicitly aimed at the segment of the market most associated with thin trading, low institutional ownership, and susceptibility to manipulation, often smaller, newer, or reverse-merger companies without a natural, deep shareholder base. Pushing that population toward the OTC market more quickly, with less opportunity to fight a determination while remaining listed, will likely accelerate an existing trend of consolidation among Nasdaq’s smallest issuers. At the same time, critics’ concerns are not unreasonable. A company can fall below $5 million in market value for reasons that have nothing to do with fraud, such as a broad market downturn, sector rotation, or a single bad quarter, and this rule does not distinguish between that company and one that is genuinely being propped up or manipulated. The absence of a cure period means the rule will, by design, sometimes catch companies that a more forgiving standard would have let recover.

Practical Takeaways

Monitor proactively, not reactively. Given the immediate and incurable nature of this deficiency, listed companies should track their MVLS (closing bid price multiplied by shares outstanding, aggregated across share classes) on an ongoing basis, rather than waiting for a Nasdaq staff notice, since a sustained MVLS below $5 million for 30 consecutive business days now triggers automatic suspension and delisting with no cure period.
Treat a Hearings Panel appeal as limited protection. The appeal will not stay the suspension, the company’s shares will trade OTC in the interim, and the Panel’s authority is narrow, permitting it only to reverse a determination issued in error or to grant up to 180 days for the company to meet Nasdaq’s more stringent initial listing standards.
Plan ahead of the threshold, not at it. Companies trading in the vicinity of $5 million in market value should consider, well before any deficiency arises, the tools available to build a cushion, such as additional capital raises or strategic transactions, since by the time a Staff Delisting Determination issues, most of the usual remedial runway will already be gone.

If you have any questions, please contact Anand Saha (asaha@cronelawgroup.com), Liang Shih (lshih@cronelawgroup.com), Daisy Dai (DDai@cronelawgroup.com), Hongye (Eve) Mao (hmao@cronelawgroup.com) or your usual Crone contact.