“Dramatic” Nasdaq Rules Would Upgrade China Listings, Spur Solutions

Core Viewpoint - The Nasdaq's proposed tougher listing rules for smaller companies, particularly from China, aim to enhance investor protection but may significantly impact businesses and investors seeking alternatives [1][2]. Group 1: Proposed Changes and Impacts - The new standards will raise the minimum public float for IPOs to $15 million from $5 million for profitable companies, and a new minimum of $25 million will be required for Chinese companies [7][8]. - Companies failing to meet continued listing standards, such as maintaining a $1 share price with a public float under $5 million, will face immediate delisting [8]. - The proposed changes follow a poor performance of smaller Nasdaq IPOs in 2024, particularly those from China, which saw an average return of negative 55% [4]. Group 2: Market Dynamics and Trends - The number of publicly traded companies in the U.S. has decreased by 17% over the past three years, with a significant drop since 1997 [5]. - The average size of Chinese IPOs has shrunk to $50 million in 2024 from $300 million in 2021, influenced by U.S.-China tensions and increased scrutiny from Chinese regulators [6]. - There is a potential "rush to market" by Chinese companies looking to list under current rules before the new regulations are implemented [9]. Group 3: Alternatives and Strategies - Companies unable to meet the $25 million threshold may consider listing on the NYSE American exchange or restructuring ownership to reduce ties to mainland China [11]. - Some companies may opt for a SPAC merger or "de-SPAC" process, which allows them to meet float requirements through shares owned by non-affiliated shareholders [12]. - The higher minimum float requirement may lead companies to seek larger institutional investors rather than relying on smaller investments from friends and family [10].