Update: Nasdaq’s Modified $5 Million MVLS Proposal Offers Limited Relief, But Raises the Bar for Small-Cap Issuers Seeking to Remain Listed

As a follow up to our prior updates on Nasdaq’s proposed new continued listing standard requiring issuers listed on the Nasdaq Global Market and Nasdaq Capital Market to maintain at least $5 million in Market Value of Listed Securities (“MVLS”), Nasdaq has filed an amended proposal with the Securities and Exchange Commission.

On Jun. 22nd, the SEC published notice of Nasdaq’s proposed rule change, as modified by Amendment No. 1. The amended proposal does not walk back the central feature of the original proposal: Nasdaq-listed companies would still be required to maintain at least $5 million in MVLS, and a company that fails to satisfy that requirement for 30 consecutive business days would receive a Staff Delisting Determination and be subject to immediate suspension and delisting.

The notable change is procedural, but meaningful. Under the original proposal, the Hearings Panel’s discretion would have been sharply limited, effectively allowing reversal only if Nasdaq Staff made a factual error in applying the rule. In response to comments, Nasdaq has now proposed giving the Hearings Panel discretion, where appropriate, to grant an exception for up to 180 days from the Staff Delisting Determination.

However, that exception is narrow. The company would not simply need to regain compliance with the $5 million MVLS continued listing requirement. Instead, the company would need to demonstrate that it satisfies all applicable initial listing requirements.

This is an important distinction. The amended proposal provides a possible path back for companies whose low market value is temporary, but it does not create a traditional cure period. In practical terms, Nasdaq is proposing a “re-entry” standard rather than a “repair” standard. Companies that fall below the proposed MVLS threshold would need to show that they are strong enough to meet the higher initial listing framework, not merely that they have moved back above the continued listing threshold.

Nasdaq also continues to take the position that a request for a hearing should not stay suspension of trading on Nasdaq. As a result, a company that receives a Staff Delisting Determination for failure to maintain the proposed $5 million MVLS requirement could appeal to a Hearings Panel, but its securities would generally trade in the over-the-counter market while that appeal is pending.

Nasdaq’s amended proposal appears designed to respond to concerns that the original proposal was too rigid for companies experiencing temporary valuation pressure. At the same time, the modification reinforces Nasdaq’s broader position that issuers with sustained MVLS below $5 million present heightened investor protection and market quality concerns.

Taken together, the amended proposal is not a retreat from Nasdaq’s broader effort to impose stricter standards on low-market-value issuers. Rather, it gives Nasdaq a more defensible procedural framework while preserving the core consequence of the proposal: shorter timelines, less flexibility, and a higher practical burden for small-cap companies that fall below the proposed threshold.

For issuers trading near the proposed $5 million MVLS threshold, the takeaway remains the same, but with added urgency. Companies should not assume that a post-deficiency rebound will be enough. If adopted, the rule would require affected issuers to be prepared to address not only market value, but also whether they can satisfy the full initial listing standards if forced into a Hearings Panel process.

Issuers operating close to the proposed threshold should consider evaluating their MVLS trends, capital structure, financing needs, investor relations strategy, and potential listing alternatives before a deficiency is triggered. While the amended proposal leaves room for companies with genuinely temporary issues, the burden to remain on Nasdaq would be materially higher once the 30-business-day period has run.  For small-cap issuers, the proposal is a reminder that listing compliance should be treated as part of an ongoing capital markets strategy, particularly as Nasdaq continues to sharpen its focus on market quality and the suitability of companies for continued listing.

Contact Clark Hill

If this development is of interest to your business or if you have questions regarding the content of this alert, please contact any member of Clark Hill’s Capital Markets and Securities group for additional details and strategic guidance.

Jeny Zarmon (jzarmon@clarkhill.com; 609.785.2918)

Victoria Bantz (vbantz@clarkhill.com; 303.943.9279)

Jim Groth (jgroth@clarkhill.com; 312.701.6830)

Randy Katz (rkatz@clarkhill.com; 213.417.5310)

Sander Zagzebski (szagzebski@clarkhill.com; 213.417.5175)

Charles Berry (cberry@clarkhill.com; 480.684.1302)

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