Nasdaq Raises the Bar, A Rule Change That Could Reshape the Nano-Cap Landscape

In a move that is already reverberating across the lower end of the public markets, the U.S. Securities and Exchange Commission approved a Nasdaq rule change on December 18 that significantly tightens liquidity thresholds for companies seeking to list, or remain listed, on Nasdaq. While framed as a technical adjustment, the change carries meaningful consequences for nano-cap issuers, IPO candidates and companies aspiring to graduate from the OTC Markets.

The Rule Change, in Plain Terms

Under the newly approved rule, Nasdaq increased the minimum Market Value of Unrestricted Publicly Held Shares (MVUPHS) as follows:

• Nasdaq Capital Market (Net Income Standard)
  Minimum MVUPHS increased from $5 million to $15 million
• Nasdaq Global Market (Income Standard)
  Minimum MVUPHS increased from $8 million to $15 million

The rule becomes operative on or about January 18, 2026, roughly 30 days after SEC approval.

This adjustment follows an earlier and equally consequential Nasdaq change finalized in March 2025, under which shares registered for resale in connection with an IPO no longer count toward satisfying MVUPHS requirements. That modification eliminated a long-used pathway in which companies relied on resale registrations, often tied to PIPE investors or legacy shareholders, to artificially bolster their public float for listing purposes.

Taken together, these two rule changes mark one of the most significant tightening cycles Nasdaq has implemented for smaller issuers in more than a decade.

Why Nasdaq Is Doing This

From Nasdaq’s perspective, the motivation is straightforward and to the point of liquidity, price discovery and investor protection. Thinly traded nano-cap stocks have long been associated with elevated volatility, susceptibility to manipulation and limited institutional participation. By raising MVUPHS thresholds, Nasdaq is effectively signaling that public market access on a national exchange requires deeper, more durable public floats.

This also aligns Nasdaq more closely with institutional expectations. Asset managers, ETFs and index providers increasingly avoid securities with shallow floats and inconsistent liquidity. Nasdaq’s rule change can be viewed as an effort to future-proof its listings and reinforce the credibility of its lower tiers.

The Impact on Nano-Cap Companies Already on Nasdaq

For nano-cap issuers currently listed on Nasdaq Capital Market or Nasdaq Global Market, the implications are significant.

Companies with limited public floats, concentrated insider ownership or chronically low trading volumes may find themselves unable to meet the new $15 million MVUPHS threshold. For many, this will not be a matter of operational performance but of capital structure.

If a company fails to regain compliance within the applicable cure periods, the most likely outcome is downlisting to OTC Markets.

Such a move can trigger a cascade of secondary effects:

• Loss of institutional and ETF eligibility
• Reduced analyst coverage
• Lower liquidity and wider bid-ask spreads
• Increased cost of capital
• Potential covenant or financing complications

In practical terms, once a company is pushed off Nasdaq, returning becomes materially harder under the new rules.

A Higher Wall for OTC Uplists

Perhaps the most profound impact will be felt by OTC Markets issuers seeking to uplist to Nasdaq.

Historically, uplisting from OTCQB or OTCQX to Nasdaq was achievable through a combination of reverse splits, resale registrations and modest public float expansions. That playbook is now largely obsolete.

With resale shares excluded from MVUPHS calculations and the threshold raised to $15 million, OTC companies must now demonstrate genuine, organically distributed public ownership at scale, typically requiring:

• Larger primary offerings
• Broader retail and institutional participation
• More robust underwriting support
• Stronger balance sheets

For many OTC issuers, particularly those in the nano-cap category, this effectively closes the Nasdaq on-ramp unless they can execute transformational financings.

A Structural Shift in the Small-Cap Ecosystem

The broader implication is a shrinking funnel between private markets, OTC Markets and Nasdaq. Fewer companies will qualify, fewer will graduate and fewer will remain listed without proactive capital planning.

This dynamic may accelerate several trends already underway:

• More companies choosing to stay private longer
• Greater reliance on private credit, structured equity and strategic investors
• Increased use of alternative liquidity mechanisms outside public markets
• Consolidation among nano-cap issuers seeking scale to survive

For investors, the rule change may ultimately improve overall market quality on Nasdaq, but it also reduces the universe of speculative early-stage public opportunities.

The Bottom Line

Nasdaq’s increase in MVUPHS requirements is more than a technical listing adjustment, it is a clear statement of intent. The era of ultra-thin floats and marginal liquidity on a national exchange is coming to an end.

For nano-cap companies, the message is unambiguous: public market access now requires real liquidity, real distribution and real scale. For OTC issuers, the path to Nasdaq has become steeper, narrower and far more capital-intensive.

As the January 2026 effective date approaches, boards, executives and investors alike will need to reassess whether Nasdaq remains a realistic destination or whether alternative strategies for capital formation and liquidity will define the next chapter of the small-cap market.