On Oct. 7, 2026, the Securities and Exchange Commission (the Commission) issued notice that an amendment to Nasdaq Listing Rule 5505 (the Amendment) filed by The Nasdaq Stock Market LLC (Nasdaq) on Sep. 30, 2026, is effective immediately. The Amendment eliminates the alternative price standard that allowed companies to list securities on The Nasdaq Capital Market priced between $2 and $4, subject to certain additional criteria. As a result, companies applying to list on The Nasdaq Capital Market must now satisfy a single, uniform minimum price of $4 per share. While the Amendment took effect immediately, the new requirement is expected to become operative on Oct. 30, 2026. Issuers and their advisors planning initial public offerings, direct listings, uplistings, or other initial listings on The Nasdaq Capital Market may need to revisit pricing and timing for any transaction expected to price below $4 per share.
The Nasdaq Capital Market’s Former Alternative Listing Standard
Before the Amendment, Rule 5505(a)(1)(B) gave companies an alternative route to listing on The Nasdaq Capital Market. A company might qualify with a minimum closing price of $3 per share if it met the Equity Standard or Net Income Standard under Listing Rules 5505(b)(1) or (b)(3), or $2 per share if it met the Market Value of Listed Securities Standard under Listing Rule 5505(b)(2), so long as its securities satisfied the exclusion from the “penny stock” definition under Rule 3a51-1(g) under the Securities Exchange Act of 1934, as amended (the Exchange Act). Reliance on that route required the issuer to satisfy one of three financial tests: (i) net tangible assets in excess of $2 million if the issuer has been in continuous operation for at least three years; (ii) net tangible assets in excess of $5 million if the issuer has been in continuous operation for less than three years; or (iii) average revenue of at least $6 million for the last three years.
The Amendment and Rationale
Pursuant to the Amendment, a minimum $4 per share price will be applicable to all initial listings on The Nasdaq Capital Market, with no exceptions or alternative criteria allowing for a lower price.
Nasdaq had previously introduced the former alternative price standard to enhance competition among exchanges, particularly with NYSE American, then the only other national securities exchange that permitted listings below $4. The Commission approved NYSE American’s proposal to remove its own sub-$4 listing standard earlier this year, and accordingly Nasdaq no longer had a competitive rationale to maintain its alternative listing standard. In addition, Nasdaq believes that the Amendment is consistent with Section 6(b)(5) of the Exchange Act by eliminating initial listing requirements that may cause securities to become susceptible to manipulation.
At any time within 60 days of the Sept. 30, 2026, filing, the Commission may temporarily suspend the Amendment if it believes that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Exchange Act. If the Commission takes such action, it will institute proceedings to determine whether the Amendment should be approved or disapproved.
How the Nasdaq Rule Change May Affect Companies Listed Under the Former Standard
The Amendment does not remove issuers already listed on Nasdaq under the former alternative price standard. However, Nasdaq is retaining Listing Rule IM-5505-2 and will continue to monitor these issuers: if an issuer no longer satisfies the tests set out in the former standard and does not qualify for any other “penny stock” exclusion under Rule 3a51-1, Nasdaq will identify the issuer on a list posted on its public website, and Nasdaq will maintain the list for as long as any such issuer remains listed. Inclusion on that list, or otherwise being a “penny stock,” may give rise to onerous penny stock-related obligations for broker-dealers that effect transactions in the company’s securities, in addition to other potentially adverse consequences. An issuer whose stock achieves a closing price of at least $4 for five consecutive business days while satisfying all other applicable listing requirements will no longer be considered as having listed under the former alternative price standard and will cease to be subject to the associated monitoring.
Key Takeaways
- Pending Listings Under the Alternative Price Standard. Companies with listings in process on The Nasdaq Capital Market planning to comply with the alternative price standard must complete the listing prior to the Amendment’s operative date or otherwise will need to satisfy the $4 minimum price requirement, which, among other things, may require restructuring transaction terms and timetables and the company’s organizational structure and documentation.
- Future Listings on The Nasdaq Capital Market. Companies considering a listing on The Nasdaq Capital Market may wish to begin coordinating early in the process with their underwriters, counsel, and other advisors to structure the proposed listing around a minimum $4 share price, including the consideration of whether a reverse stock split or other corporate actions might be necessary or advisable. Any such action should also be considered with the other listing requirements of The Nasdaq Capital Market in mind.
- Issuers Listed Under the Former Standard. Issuers currently listed on The Nasdaq Capital Market that listed under the former standard might consider tracking their net tangible assets and revenue against the former benchmarks, since a shortfall without another “penny stock” exclusion may lead to public identification on Nasdaq’s website, and periodically review Nasdaq’s published list. Issuers should also consider whether actions designed to achieve a closing price of at least $4 for five consecutive business days are attainable or advisable, particularly in light of their other continued listing requirements and the potential consequences of actions (e.g., reverse stock splits) to attain this.