A stock exchange is a corporation that provides brokers a place to trade securities such as stocks. Thus it helps organize buyers and sellers in one place. If you want to trade your company's stock on an exchange, you must list it on that exchange. In the United States, the two most significant exchanges are the New York Stock Exchange (NYSE) and Nasdaq. An exchange's listing requirements set minimum thresholds for the number of publicly traded shares, total market value, stock price and number of shareholders. Every exchange has its own requirements.
For you to list your company on Nasdaq, it must have at least 1,250,000 publicly traded shares (not including those owned by directors with more than a 10 percent stake in the company), with a bid price greater than $5, have at least 550 shareholders, have an average trading volume of 1.1 million shares over the last 12 months and follow Nasdaq's corporate governance rules. On top of that, the company must meet one of the following standards. First, no net loss over the past three years; at least $11 million pre-tax earnings over those three years; and at least $2.2 million in the past two years. Or, had no negative cash flow over the past three years with a minimum of $27.5 million of aggregate cash flow. Or, at least $850 million in average market capitalization over the past 12 months and revenues of at least $90 million. If your company meets the first set of criteria and one of the last three, then it can be listed on Nasdaq.
The NYSE has requirements similar to Nasdaq's, but some of the details differ. The NYSE requires companies to have at least 1.1 million publicly held shares. Those shares must be held by at least 2,200 shareholders and traded at a monthly volume average of 100,000 shares. The exchange wants companies that are in demand by the public, thus the requirements for liquidity and a good chance of succeeding.
If you take your company public, you should list it on an exchange. Being listed helps bring exposure to your company and makes it easier for people to trade its stock. If you're not listed on an exchange, investors will have a hard time determining the fair market price of the stock. Being listed on the more prestigious and widely used exchanges increases the chances of your company's success.
After your company is accepted to an exchange, it must still maintain certain standards, otherwise it might be de-listed. Falling below minimum share price is the most common way of being de-listed. Each exchange has its own requirements. For example, the NYSE requires that a firm have no fewer than 400 shareholders.
Each stock exchange publishes its requirements online, including standards for several categories. For example, exchanges have different standards for U.S. companies and non-U.S. companies. They also have different standards for special-purpose acquisition companies.
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