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From April To September: Nasdaq’s Microcap Listing Rule Changes And Proposals

Forbes (Oct 31, 2025, 08:00am EDT)---

For two consecutive years, we've seen sweeping changes to the microcap IPO landscape. In 2024, the NYSE adopted a $10 million minimum gross proceeds requirement for microcap IPOs. And in 2025, Nasdaq has gone even further, completely rewriting the rulebook for emerging growth companies.

In April, the SEC approved Nasdaq's introduction of a new rule. Then, in September, Nasdaq introduced a set of proposed changes. Taken together, Nasdaq’s April rule change and its September proposal represent one of the most consequential shifts in modern microcap history, redefining what it takes for a company to go public or uplist from the over-the-counter (OTC) markets.

The message is clear: liquidity, scale and credibility now outweigh growth stories and projections. The bar isn’t just higher; it’s fundamentally different. For founders and boards building public-ready companies, understanding this shift is not optional. It’s the difference between getting listed and getting left behind.

April 2025: The First Shoe Drops

In March 2025, the SEC approved Nasdaq’s overhaul of its initial listing standards, introducing a two-tier system tied directly to profitability. The rule went into effect in April 2025. The rule, though technical, had an enormous impact on deal strategy and IPO structuring.

Under the prior regime, companies could meet Nasdaq’s liquidity requirements by counting both IPO proceeds and the value of existing freely tradable shares, as well as stock previously issued and no longer restricted. That approach is now gone. Instead, Nasdaq determined that only capital raised in the IPO counts toward public float.

The new rule drew a sharp line between companies with earnings and those still chasing growth:

• Profit-generating companies, with at least $750,000 in audited net income in the most recent fiscal year (or two of the previous three years), could qualify with a minimum $5 million raise.

• All other companies, those not meeting that profitability test, now needed to raise at least $15 million in IPO proceeds

And critically, all that capital has to come from newly issued shares; selling shareholders no longer count toward the threshold.

This bifurcation created what I observed many in the market dubbed the “two-tier IPO standard.” Profitability now brought flexibility, while high-growth, pre-profit companies were required to demonstrate broader investor support and stronger capitalization to earn their listing.

The implications of this new rule are immense. The median microcap IPO in 2024 raised an average of $7 million. Under the new framework, those same issuers would now fall short unless they doubled their capital raise or improved earnings.

September 2025: Nasdaq Proposes Tightening The Rules Again

Just several months later, Nasdaq proposed going further. In September, according to a press release, it introduced a second round of listing enhancements aimed at what it called “reinforcing its long-standing commitment to capital formation while ensuring investor protection and upholding market integrity.” The SEC has not yet approved these changes; however, the proposed changes are telling.

This time, the exchange wants to eliminate the $5 million capital raise exception entirely for profitable companies. Every company, profitable or not, would have to raise at least $15 million to list on the Nasdaq Capital Market. In one move, Nasdaq wants to remove the only remaining pathway for smaller, profitable microcap companies to access the public markets with a modest raise.

That wasn’t the only proposed change. Per the press release referenced earlier, Nasdaq also:

• Introduced an accelerated delisting rule, allowing suspension of any company whose market cap falls below $5 million for 10 consecutive trading days.
• Required companies mainly working from China to raise at least $25 million at IPO, expanding upon its earlier “restrictive markets” framework that it put forward in 2020 (and that the SEC accepted in 2021).
• Reiterated that it would “continue to actively refer cases” to the SEC and FINRA “on potentially manipulative trading activities” while “strengthening” its “cooperation with both domestic and international regulators to reinforce effective oversight and maintain high standards.”

There is, however, one narrow exception: OTC-listed companies with a proven record of active trading, an average daily volume of at least 2,000 shares at a price of $4 or more over 30 trading days, may still rely on their existing stockholder base in meeting Nasdaq liquidity requirements, basically uplisting with smaller offerings that are not $15 million. This carveout acknowledges that companies with real, consistent market liquidity have already demonstrated investor engagement and market integrity.

Still, for most issuers, the impact is profound. The proposals that went into effect in April rewarded companies with real earnings; the September proposals, if approved by the SEC, will remove nuance altogether. Nasdaq, in my view, is signaling that it wants larger offerings across the board, regardless of profitability, size or growth stage.

This shift isn’t theoretical; it’s transformational. Smaller companies that once could raise $5 million to $7 million and go public would struggle to qualify. And because offerings must be firm-commitment underwritten, the rule would also increase both costs and complexity for every microcap IPO.

For China-based issuers, the $25 million requirement would create an even steeper climb, effectively filtering out smaller or early-stage cross-border listings. Nasdaq’s definition for “China-based” is broad, and it would be intriguing to see how many Foreign Private Issuers listed in the U.S. would fall into this category.

My interpretation of Nasdaq’s intent is: fewer thinly traded stocks, fewer delistings and stronger institutional-grade liquidity from day one. The exchange is signaling to investors and regulators alike that quality, scale and transparency, not volume, define market integrity in this new era.

Reading Between The Lines

At first glance, Nasdaq’s April changes and its September proposals simply raise the capital bar. But a deeper look reveals a broader shift in philosophy. In my view, Nasdaq is betting that tighter gates will restore trust in the micro-cap ecosystem, a segment I’ve observed is often criticized for post-IPO volatility, limited liquidity and perceived speculative behavior.

I see these approved and proposed reforms as being about confidence. They’ve arguably been designed to ensure that the companies reaching the public markets can sustain trading, attract coverage and meet ongoing compliance with fewer risks of delisting.

Still, the cost is real. I expect that many legitimate emerging growth companies, particularly those between $50 million to $150 million in enterprise value, will find themselves priced out of the traditional Nasdaq IPO path. That will likely push more founders toward reverse mergers, direct listings or hybrid financing structures to achieve liquidity without triggering the new thresholds. It may also keep founders on the OTC Markets longer than they’d like, because qualifying for Nasdaq now takes more capital, more discipline and more proof of market readiness than ever before.

I expect that the approved changes and the proposed ones (if the SEC approves them) will also have a chilling effect on the timing of uplists from OTC Markets. Many companies that once relied on a small private investment in private equity (PIPE) raise to qualify will have to treat uplisting as a full-scale IPO, with all the costs and preparation that entails.

From a practical perspective, I recommend that founders and boards take three steps immediately:

1. Model your capital strategy under the new thresholds. If your go-public plan doesn’t exceed $15 million in new capital (or $25 million if China-based), it’s time to recalibrate.
2. Revisit your investor mix. Thin floats are what Nasdaq is targeting; stronger institutional support will matter more than ever.
3. Reframe your timeline. The IPO process can now be longer than the typical six to nine months. The market favors companies that operate like they’re public long before they are.

A Higher Bar

Throughout 2025, Nasdaq has effectively told founders: being small is fine, but being undercapitalized is not.

These back-to-back moves, first splitting the market by profitability, then wanting to level it at a higher capital standard, mark the start of a new era of accountability. In the short term, they may sideline smaller offerings, but over time, they’ll likely drive stronger aftermarket performance, greater investor confidence and a more resilient public company ecosystem.

For ambitious founders and emerging growth CEOs, the takeaway is simple: Plan for larger raises, start earlier and surround yourself with professionals who know how to navigate and pivot in real time.

Nasdaq’s bar may be higher than ever, but with the right strategy, timing and team, getting listed is still achievable.