Nasdaq has announced plans to amend its regulations concerning penny stocks, aiming to implement a swifter and more rigorous delisting process for companies that fail to meet compliance standards. This proposal was detailed in a filing posted on the exchange operator’s website on Thursday.
Under the current rules, companies listed on Nasdaq must maintain a closing price above $1 per share. If a company’s stock price falls below this threshold for 30 consecutive trading days, it is considered non-compliant with Nasdaq’s listing standards and is granted a 180-day period to regain compliance.
Penny stocks, which typically trade below $1 per share, face stricter scrutiny under the proposed changes. If a company does not raise its stock price above $1 within the initial 180-day compliance period, it may request an additional 180-day extension. At the end of the second period, companies with stock prices still below $1 currently have the option to appeal to Nasdaq’s hearings panel, which temporarily halts the delisting process pending a review.
The proposed amendments, however, could accelerate the delisting of non-compliant companies. Should these changes be approved, Nasdaq will suspend trading for companies whose share price remains below $1 after a total of 360 trading days, eliminating the appeal option. Additionally, Nasdaq plans to issue a delisting determination immediately to any company whose stock price falls below $1 if it has conducted a reverse stock split within the past year.
The filing, submitted on Tuesday, notes that some companies, particularly those facing financial difficulties or prolonged operational challenges, have engaged in repeated reverse stock splits. Nasdaq’s filing states, “Such behavior is often indicative of severe financial or operational distress, making these companies unsuitable for trading on Nasdaq and posing risks to investor protection.”
Reverse stock splits are typically executed to artificially boost a stock’s price by reducing the number of outstanding shares. Nasdaq has not commented on the proposed changes in response inquiry. The amendments to Nasdaq’s listing standards are subject to approval by the U.S. Securities and Exchange Commission.
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