SEC Approves Nasdaq’s Heightened Initial Listing Standards for China-Based Companies
On May 14, 2026, the Securities and Exchange Commission (“SEC”) issued a release granting accelerated approval to a Nasdaq proposed rule change that adopts stricter initial listing criteria for companies operating in China. The new rules will take effect 30 days after the date of the SEC’s approval order.
Below is a summary of the key provisions and practical implications.
The New Listing Requirements
1. Initial Public Offerings (IPOs)
A China-based company listing on Nasdaq through an IPO must conduct a firm commitment offering in the United States to public holders that result in gross proceeds to the company of at least $25 million.
2. Business Combinations
A China-based company listing in connection with a business combination must have a minimum Market Value of Unrestricted Publicly Held Shares of at least $25 million following the transaction.
3. Direct Listings
A China-based company will not be permitted to list on the Nasdaq Global Market or Nasdaq Capital Market through a direct listing. A direct listing will be available only if the company satisfies the applicable requirements for the Nasdaq Global Select Market.
4. Transfers from OTC Markets or Other Exchanges
A China-based company transferring from the OTC market or another national securities exchange must have traded on the market for at least one year and must have a Market Value of Unrestricted Publicly Held Shares of at least $25 million before becoming eligible to list on Nasdaq.
Who Is Covered: Identifying China-Based Companies
Under new Nasdaq Listing Rule 5210(l), the heightened listing standards apply to any company that is headquartered or incorporated in China (including the Hong Kong Special Administrative Region and the Macau Special Administrative Region), or whose business is principally administered in one of those jurisdictions. Nasdaq will determine where a company is principally administered based on a holistic analysis of seven factors:
whether the company’s books and records are located in China;
whether at least 50% of the company’s assets are located in China;
whether at least 50% of the company’s revenues are derived from China;
whether at least 50% of the company’s directors are citizens of, or reside in, China;
whether at least 50% of the company’s officers are citizens of, or reside in, China;
whether at least 50% of the company’s employees are based in China; and
whether the company is controlled by, or under common control with, persons or entities that are citizens of, reside in, or whose business is headquartered, incorporated, or principally administered in China.
Specifically, Nasdaq stated that no single factor will automatically determine whether a company is covered. Rather, Nasdaq will evaluate the factors holistically based on the company’s overall facts and circumstances.
Practical Implications
The approval of these new rules represents a significant tightening of the U.S. listing landscape for China-based issuers. China-based companies considering a Nasdaq listing should evaluate the new requirements at the outset of the planning process. For smaller China-based issuers, the new rules may significantly narrow the path to Nasdaq. Companies that previously contemplated smaller-cap IPOs may now need to raise a substantially larger amount, consider alternative listing venues (e.g., NYSE American or OTC Markets), or pursue additional private financing before seeking a Nasdaq listing.
If you have any questions, please contact Anand Saha (asaha@cronelawgroup.com), Liang Shih (lshih@cronelawgroup.com), Hongye (Eve) Mao (hmao@cronelawgroup.com), Daisy Dai (DDai@cronelawgroup.com) or your usual Crone contact.
