SEC Approves Nasdaq's New $5 Million Market Capitalization Threshold for Continued Listing

July 23, 2026

–Client Alert

SEC Approves Nasdaq's New $5 Million Market Capitalization Threshold for Continued Listing

On July 22, 2026, the Securities and Exchange Commission (the “SEC”) approved Nasdaq's amended proposed rule for a new continued listing requirement requiring Nasdaq-listed companies to maintain a minimum Market Value of Listed Securities (“MVLS”) of $5 million. The SEC approved the proposal as modified by Amendment No. 1 following a lengthy process that generated significant comments from market participants, issuers, investors, exchanges, law firms, and industry groups.

The new rule will have a particularly pernicious impact on micro-cap, small-cap and development-stage public companies. Companies that fail to maintain an MVLS of at least $5 million for 30 consecutive business days will be subject to immediate suspension and delisting procedures, without the benefit of the traditional cure period available for many other Nasdaq continued listing deficiencies.

Overview of the New Requirement

Under the approved rule, Nasdaq-listed companies on the Nasdaq Capital Market, Nasdaq Global Market and Nasdaq Global Select Market must maintain an MVLS of at least $5 million. MVLS is generally calculated as the consolidated closing bid price multiplied by the number of listed securities outstanding.

If a company's MVLS remains below $5 million for 30 consecutive business days:

Nasdaq will issue a Staff Delisting Determination (“Staff Delisting Determination”).
The company will not receive a compliance or cure period.
Trading in the company's securities will be suspended from Nasdaq.
The company will generally trade on the over-the-counter market while pursuing any appeal rights.

This represents a significant departure from Nasdaq's traditional approach to continued listing deficiencies, many of which provide issuers with a compliance period to regain compliance while remaining listed.

Amendment No. 1: Limited Relief Through Hearings Panel Review

In response to comments received during the rulemaking process, Nasdaq amended its proposal to provide a limited avenue for relief. Under new Nasdaq Rule 5815(c)(1)(I), a Nasdaq Hearings Panel may grant an exception of up to 180 days from the Staff Delisting Determination if the company demonstrates that it can satisfy Nasdaq's initial listing standards. The Hearings Panel also retains authority to reverse a delisting determination if Nasdaq staff acted in error. Importantly, however:

The exception is discretionary.
Suspension from Nasdaq trading is not automatically stayed during the appeal.
The issuer generally must demonstrate compliance with Nasdaq's initial listing standards, which are more stringent than Nasdaq's continued listing standards.

Accordingly, while Amendment No. 1 provides a modest additional procedural mechanism, companies should not view it as a substitute for proactively addressing potential listing compliance concerns.

SEC's Rationale for Approval

The SEC concluded that the new rule is consistent with Section 6(b) the Securities Exchange Act of 1934 and agreed with Nasdaq's position that issuers with an MVLS below $5 million may present heightened risks of manipulation and challenges to maintaining fair and orderly markets. In approving the rule, the SEC relied in part on its own historical analysis, which found that many issuers that remained below the $5 million threshold for 30 consecutive business days continued to trade below that level for extended periods and were frequently later delisted for other quantitative listing deficiencies. Although the SEC acknowledged comments noting that some issuers ultimately recover after temporarily falling below the threshold, it determined that the investor protection benefits of the rule, together with the limited relief provided by Amendment No. 1, supported approval.

Practical Considerations for Nasdaq Issuers

The new rule creates a material compliance risk for many smaller public companies, particularly those operating in capital-intensive industries such as biotechnology, life sciences, technology, energy transition and other emerging growth sectors.

Companies should consider implementing enhanced monitoring procedures to track MVLS on an ongoing basis and evaluate potential corrective actions before a deficiency develops. Potential considerations may include:

Capital raising transactions.
Strategic transactions or business combinations.
Balance sheet recapitalizations.
Alternative listing or trading strategies.
Other corporate actions designed to improve compliance with Nasdaq's quantitative standards.

Because the MVLS calculation is based on market capitalization, often coupled with other listing metrics such as bid price, stockholders' equity, market value of publicly held shares and public float requirements, compliance planning should be evaluated holistically and on a company-specific basis.

What Public Companies Should Do Now

Nasdaq-listed companies, particularly those with market capitalizations approaching the $5 million threshold, should evaluate the potential impact of the new rule immediately.

Companies should consider:

Reviewing their current and projected MVLS levels.
Assessing compliance with all Nasdaq continued listing standards.
Evaluating available capital markets and corporate finance alternatives.
Developing contingency plans for potential listing deficiencies.
Understanding the implications of a suspension and OTC market transition.
Evaluating whether actions can be taken now to strengthen listing compliance and capital market flexibility.
The final rule did not set an effectiveness date nor advise issuers whether there would be a phase-in period for complying with the rule, the assumption being that it is effective immediately.

For More Information

Sullivan & Worcester LLP has been actively involved in advising issuers regarding Nasdaq listing standards, continued listing compliance, capital raising transactions, recapitalizations, exchange matters and SEC regulatory developments. Questions regarding the new MVLS requirement, its potential impact on an issuer's continued Nasdaq listing, the impact on a portfolio company, or available alternatives to address potential compliance concerns, may be directed to your regular Sullivan & Worcester attorney or any member of our Corporate and Securities Practice Group.

This Client Alert has been prepared by David Danovitch, a Partner, Angela Gomes, a Partner, Brendan O'Brien, a Partner, and Phillip Carnevale, an Associate, in the Corporate and Securities practice group of the international law firm of Sullivan & Worcester LLP. For more information, Mr. Danovitch may be reached in our New York office by calling +1 (212) 660-3060 or by email at ddanovitch@sullivanlaw.com; Ms. Gomes may be reached in our Boston office by calling +1 (617) 338-2957 or by email at agomes@sullivanlaw.com; Mr. O'Brien may be reached in our New York office by calling +1 (212) 660-3013 or by email at bobrien@sullivanlaw.com; and Mr. Carnevale may be reached in our New York office by calling +1 (212) 660-3002 or by email at pcarnevale@sullivanlaw.com.

This Client Alert is provided for general informational purposes only and does not constitute legal advice.

Angela Gomes

Angela Gomes

SEC Approves Nasdaq's New $5 Million Market Capitalization Threshold for Continued Listing

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