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Nasdaq has proposed a new listing standard that would require companies "principally operating in China" to raise at least $25 million in gross proceeds in a firm-commitment underwritten IPO to list on Nasdaq. The proposal has been filed with the U.S. Securities and Exchange Commission and, if approved, would be implemented promptly, with a 30‑day window for companies already well into the listing process to proceed under the prior standards. This change revives (in part) Nasdaq's 2021 "restrictive markets" approach but tightens it by setting a flat $25 million minimum without the prior 25% alternative. See Nasdaq's announcement and rule filings dated September 4, 2025.
Material terms of the proposed rule:
- Scope: Applies to "companies principally operating in China." Expect Nasdaq consider factors such as where revenue, assets, management and operations are based (consistent with prior restrictive market analysis).
- Threshold: Minimum $25 million gross IPO proceeds in a firm-commitment underwritten U.S. offering to list.
- Timing: Effective upon SEC approval; 30‑day grandfathering for deals already in the pipeline; thereafter, all new listings must meet the new rule.
- Rationale: Enhance liquidity and reduce micro-cap manipulation risks; aligns with Nasdaq's broader small-cap reforms (e.g., higher float under the net income standard and faster delisting for very low market value); and address concern related to investor risk and U.S. national security.
Practical implications for Chinese micro-cap IPOs
- Increase deal size: Many China-based micro-caps have targeted $5 to $15 million raises in the past. Under the proposal, these deals must be upsized to at least $25 million or consider alternative paths.
- Underwriter dynamics: Book-building to $25 million requires deeper institutional demand, broader distribution, and tighter allocations. Expect greater emphasis on cornerstone/anchor orders and full greenshoe execution.
- Liquidity tests interact: Recent Nasdaq changes require certain market value thresholds to be met from IPO proceeds (excluding selling shareholders). Structuring must prioritize primary issuance to meet both the $25 million requirement and float/liquidity metrics.
- Timeline pressure: If your filing is advanced, the 30‑day transition may be decisive. Coordinate with counsel and your underwriter immediately to determine if you can price under current rules or adjust conform to the new standard.
- PRC regulatory readiness: The CSRC Overseas Listing Regulations require filings for direct/indirect overseas listings. Building sufficient lead time to complete CSRC procedures so regulatory timing does not jeopardize your ability to meet Nasdaq's implementation window.
Strategic options if $25 million is impractical
- Reassess listing venue and timing: Consider waiting to build scale, and/or pursuing pre‑IPO private financing.
- Stage capital formation: Execute a larger, single-step IPO later rather than a smaller near-term listing that would be ineligible under the new rule.
- Enhance readiness: Strengthen corporate governance, auditor PCAOB inspection status, internal controls, and investor relations to support a larger institutional book.
Bottom line for China-based micro-cap IPO candidates, Nasdaq's proposed $25 million minimum proceeds requirement is a material reset that elevates deal size, execution complexity, and investor quality expectations. Early planning with experienced U.S. counsel and underwriters – on structure, valuation, PRC filings, and distribution – is critical to preserve a Nasdaq path.
Originally published September 22, 2025
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
