New NYSE and Nasdaq Listing Requirements

Introduction

Recently, the SEC approved rules proposed by the Nasdaq Stock Market (Nasdaq) and the New York Stock Exchange (NYSE) that permit the exchanges to accelerate the delisting process for companies that fail to maintain a $1 minimum share price. Each exchange adopted new rules affecting companies that utilize reverse stock splits to maintain their minimum price requirements. Nasdaq also accelerated the delisting process for companies that fail to remedy a minimum bid price compliance issue within 360 days of notice of the deficiency. The new rule modifications thus aim to enhance investor protection while ensuring that companies listed on these exchanges can demonstrate actual financial stability without using reverse stock splits as a means to evade regulatory intervention.

Nasdaq Rule Changes

Under previous Nasdaq listing standards, companies were required to maintain a minimum bid price of $1.00 per share. If a company's share price fell below this threshold for 30 consecutive business days, Nasdaq would notify the company, granting it a compliance period of 180 calendar days to rectify the deficiency. If the company failed to comply within this timeframe, it could potentially be eligible for a second 180-day compliance period, particularly if it notified Nasdaq of its intent to cure the deficiency through means such as a reverse stock split. Following the second 180-day compliance period, mechanisms existed for a company to request a further stay of the delisting, such as through a request for a hearing.

On January 17, 2025, the SEC issued a Notice approving Nasdaq's proposal to modify Listing Rule 5810(c)(3)(A), which governs minimum bid price compliance periods and delisting processes. Under the new rules, if a company fails to regain compliance with the minimum bid price requirements during the aggregate 360-day compliance period, it will face immediate suspension and delisting from Nasdaq, with no additional grace period provided. Additionally, if a company falls below the minimum bid price requirement for continued listing and has executed a reverse stock split within the prior year, it will not be eligible for any compliance periods and will receive an immediate delisting determination.

The rule will force companies to be more strategic in their approaches to compliance, ensuring that any actions taken to meet the bid price requirement do not inadvertently violate other listing standards. As per Nasdaq’s findings cited in the Notice, patterns of haphazard reverse stock splits often indicate deeper operational issues, which are likelier to render a company unsuitable for listing. By strengthening restrictions on stock value thresholds, Nasdaq aims to prevent companies, particularly those in financial distress, from repeatedly using reverse stock splits as a means to avoid delisting.

NYSE Rule Changes

The NYSE has also instituted similar changes to its compliance rules, which were approved by the SEC on January 15, 2025. Previously, if a company’s shares fell below an average closing price of $1.00 over 30 trading days, the company had six months to cure the defect. Under the revised Section 802.01C of the NYSE Listed Company Manual (the Manual), a company that fails to meet this minimum Price Criteria now will not be eligible for a compliance period if it has executed a reverse stock split within the past year or if it has conducted multiple reverse splits with a cumulative ratio of 200 shares or more to one within the past two years. In such cases, the NYSE will begin immediate suspension and delisting procedures.

Additionally, the NYSE modified its rules to initiate immediate suspension and delisting procedures if a company regains Price Criteria compliance only through a reverse stock split, which then causes a violation of another of the Manual’s Section 802.01A listing requirements. This regulatory approach mirrors Nasdaq's objective of preventing companies from using reverse stock splits as a temporary fix for underlying financial issues.

Both exchanges justify these changes as necessary measures to enhance listing standards and protect investors from companies that may be engaging in manipulative practices to maintain their listings.

Conclusion

The recent approval by the SEC of the regulatory changes to Nasdaq and NYSE’s minimum price compliance rules signify a more stringent approach to investor protection. Companies listed on these exchanges must now navigate stricter oversight when considering reverse stock splits as a compliance strategy. Issuers facing low share prices must be attentive to these new rules, as non-compliance could lead to swift delisting actions. As these regulations take effect, companies are encouraged to develop proactive strategies to ensure compliance and safeguard their listings.