Nasdaq to tighten rules for small Chinese issuers
Nasdaq announced stricter standards for small issuers. The exchange will accelerate delistings and tighten listing rules following Pump-and-Dump cases with Chinese stocks.
Nasdaq is rolling out an expedited process for suspending and delisting shares of small issuers that fail to meet its standards. At the same time, the exchange is raising requirements for the public float: companies listing under the net income standard must now have at least $15M in freely tradable shares.
Additional rules apply to issuers from “restricted markets,” including China. For them, the $25M minimum public offering requirement introduced in 2020 will remain in force.
The move follows suspicious trading patterns in Chinese microcap stocks listed on Nasdaq. According to the exchange, nearly 70% of cases referred to regulators since August 2022 involved such issuers.
In July, seven Chinese microcaps heavily promoted in messaging apps and social media plunged more than 80% in just a few sessions, wiping out $3.7B in investor value. The FBI reported a 300% year-over-year surge in stock fraud complaints.
John Zecca, Nasdaq’s chief legal officer, said the exchange has seen “extreme volatility and potential manipulation” in the small-cap segment of Chinese businesses.
Edwin Dorsey, author of the newsletter The Bear Cave, called Nasdaq’s new measures a “first step,” but warned they may simply push fraudsters to recycle old tickers instead of launching new entities.
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