The Rise and Fall: Behind Nasdaq's Delisting Rules and Their Impact on Companies

Learn about the NASDAQ delisting rules, which provide guidelines for removing the listing of securities on the NASDAQ stock exchange. Explore the requirements and consequences of delisting, and understand the factors that may trigger the process. Stay informed and navigate the dynamic world of stock listings with our comprehensive and insightful information.

NASDAQ Delisting Rules

Definition of NASDAQ Delisting

NASDAQ Delisting refers to the process by which a company's stock is removed from trading on the NASDAQ stock exchange.

Reasons for Delisting

There are several reasons why a company may be delisted from NASDAQ:

• Failure to meet minimum equity requirements
• Consistent failure to meet required financial reporting standards
• Violations of corporate governance rules
• Breach of listing agreement
• Inadequate market capitalization
• Bankruptcy or insolvency

Minimum Equity Requirements

NASDAQ requires companies to maintain a certain level of minimum equity to remain listed. If a company's equity falls below this threshold for a sustained period, it faces the risk of delisting.

Financial Reporting Standards

NASDAQ-listed companies must regularly submit their financial statements and meet specific reporting standards. Failure to do so can result in delisting if it continues over an extended period.

Corporate Governance Rules

NASDAQ has particular requirements for corporate governance practices that listed companies must adhere to. Failing to meet these standards may lead to delisting.

Breach of Listing Agreement

When a company violates the terms and conditions set forth in the listing agreement with NASDAQ, it can be delisted. This could happen due to various reasons, such as non-compliance with regulatory requirements or failure to pay fees.

Market Capitalization

NASDAQ requires companies to maintain a minimum market capitalization to be listed. If a company's market capitalization drops significantly, it may face potential delisting.

Bankruptcy or Insolvency

If a listed company files for bankruptcy or becomes insolvent, it will likely be delisted from NASDAQ.

Consequences of Delisting

Delisted companies often experience negative repercussions:

• Loss of access to public markets and reduced liquidity for shareholders
• Decreased visibility, which makes it harder to raise additional capital
• Potential decline in stock price and market value

Re-Listing or Transfer to Another Exchange

Delisted companies have opportunities to re-list on NASDAQ or transfer their listing to another exchange if they meet the necessary requirements.

Previous term: Delisting