
Publication
New Nasdaq and NYSE rules on use of reverse stock splits
Nasdaq and the New York Stock Exchange (NYSE) maintain certain minimum requirements that companies must meet before listing a security.
United States | Publication | March 2025
Nasdaq and the New York Stock Exchange (NYSE) maintain certain ongoing requirements that listed companies must satisfy in order to maintain their listings, including a US$1.00 minimum share price requirement. Listed companies with securities trading at or around or below this price point often conduct reverse stock splits to maintain compliance with this minimum share price requirement. Reverse stock splits typically increase the share price of a company’s stock, at least initially, by consolidating the company’s outstanding shares at a pre-determined ratio, with stockholders maintaining their respective ownership percentages in the company, subject to elimination of any resulting fractional share entitlements.
In an effort to curtail the excessive use of reverse stock splits to regain compliance with the minimum stock price requirements, particularly by distressed companies that had often resorted to repeatedly effecting a number of successive reverse stock splits over a short period of time to avoid being delisted, both the NYSE and Nasdaq recently promulgated updated rules that limited the ability of companies to utilize such practices to remedy a minimum share price deficiency.
Under the NYSE’s continued listing requirements, listed companies must maintain an average closing price of US$1.00 per share over a consecutive thirty (30) day trading period. Companies falling into non-compliance with this requirement are afforded a six month cure period to cure this deficiency. In order to regain compliance, the delinquent company must have a closing share price of at least US$1.00 on the last trading day of any calendar month during such six month cure period and an average closing share price of at least US$1.00 over the prior thirty (30) trading days.
To limit the excessive use of reverse stock splits, the NYSE amended NYSE Section 802.01C of the NYSE Listed Company Manual to restrict the use of reverse stock splits to regain compliance with the minimum share price requirement.
Amended Section 802.01C now provides that a listed company is no longer eligible for a six month cure period to regain compliance with the minimum share price requirement, and the NYSE will immediately begin suspension and delisting procedures if:
Further, listed companies may not effectuate a reverse stock split to regain compliance with the minimum share price requirement if doing so would result in non-compliance with any of the other NYSE continued listing requirements of Section 802.01A.
Similarly, the Nasdaq’s listing rules require listed companies to maintain a minimum bid price of at least US$1.00 per share. If a listed company’s share bid price falls below US$1.00 per share for thirty (30) consecutive business days, Nasdaq will deem the company noncompliant with the Nasdaq continued listing requirements and issue a deficiency notice.
Companies that receive a deficiency notice for failing to meet Nasdaq’s minimum bid price requirement generally have 180 days to cure the price deficiency. After that first 180-day period, a listed company may be granted an additional 180-day period by notifying Nasdaq of its intent to cure the price deficiency.
If the company failed to regain compliance after the second 180-day period, it could appeal a delisting decision by requesting a review by a Nasdaq hearings panel. Under Nasdaq’s prior listing rules, an appeal would automatically stay a suspension or delisting action up to an additional 180 days, effectively enabling listed companies to be noncompliant with the minimum bid price requirement for up to 540 days.
To cure a deficiency in the minimum bid price requirement, a company’s security must trade at or above US$1.00 for 10 consecutive trading days, unless Nasdaq exercises its discretion to impose a longer period up to 20 days.
In order to curb the excessive use of reverse stock splits to regain compliance with the minimum bid price requirement, Nasdaq amended its Listing Rule 5810(c)(3)(A)(iv) to limit the ability of a listed company to utilize a reverse stock split to regain compliance with the minimum bid price requirement.
Accordingly, Nasdaq listed companies that fall out of compliance with the minimum bid price requirement within one year of having conducted a reverse stock split will be issued a delisting decision rather than being granted any cure period.
Companies that receive a delisting decision, without any cure period, for falling out of compliance with the minimum bid price requirement in these circumstances because they conducted prior reverse stock splits, may still appeal that decision, which will stay the suspension of trading of its securities pending the outcome of the appeal.
Previously, if a listed company effectuated a reverse stock split to regain compliance with the minimum bid price requirement and in so doing fell out of compliance with one of the other continued listing requirements, it would be afforded a new cure period for the new deficiency, essentially giving the company additional time to regain compliance.
Under amened Listing Rule 5810(c)(3)(A), if a listed company takes an action such as a reverse stock split to regain compliance with the minimum bid price requirement and that action results in the company falling out of compliance with another listing requirement, the company will be deemed to not have cured and to remain non-compliant with the original minimum bid price requirement until both:
Furthermore, Listing Rules 5250(e)(7) and IM-5250-3 were amended to advance the deadline by which a listed company effecting a reverse stock split must submit a Company Event Notification Form to no later than 12:00 PM Eastern Time at least 10 calendar days prior to the proposed market effective date of a reverse stock split.
This amended Listing Rule became effective January 30, 2025. Previously, a Company Event Notification Form was required 5 business days in advance of the proposed market effective date.
The information required on the Company Event Notification Form for a reverse stock split includes:
Companies should be aware, however, that DTC will not make a CUSIP eligible unless the company has issued a press release. If a company does not comply with the 10 calendar day notification deadline, Nasdaq will not process a reverse stock split and will halt trading of the company’s stock.
Finally, it should be noted that Listing Rule 5810(c)(3)(A)(iii) which was included in a 2020 Listing Rule change, provides that Nasdaq will issue a delisting determination for a company whose security has a closing price of US$0.10 or less for 10 consecutive business days. In such event, a listed company is ineligible for any cure period, although suspension of trading will be stayed while an appeal is pending.
Listed companies with shares trading close to or below US$1.00 per share and contemplating a reverse stock split to regain compliance should be aware of the increased scrutiny by the NYSE and Nasdaq. Companies should take careful note of the new rules when considering actions to avoid being delisted from those exchanges as a result of the trading price of their shares.
Nasdaq listed companies considering a reverse stock split to cure a minimum bid price deficiency should begin the process sufficiently in advance of the expiration of any available cure periods due to the potential lag time, additional requirements and increased notice periods.
Publication
Nasdaq and the New York Stock Exchange (NYSE) maintain certain minimum requirements that companies must meet before listing a security.
Subscribe and stay up to date with the latest legal news, information and events . . .
© Norton Rose Fulbright US LLP 2025