Enhanced Nasdaq Regulations to Elevate China's Listings, Stimulate Resolutions
The Nasdaq, headquartered in New York, has proposed tougher listing rules for smaller companies, particularly those from China. This move comes after a series of poor performances in 2024, with an average return of a negative 55% for smaller Nasdaq IPOs, especially those from China.
Last Friday, Drew Bernstein, a long-time China accounting expert and co-chair of MarcumAsia CPAs LLP, returned from Hong Kong where an "Asia Go IPO Conference" co-hosted by MarcumAsia and the Nasdaq attracted over 900 attendees. Bernstein stated that these new standards would raise the bar for Nasdaq IPOs, particularly those coming from China.
Overseas listings by Asian companies account for about half of the Nasdaq's IPOs these days. However, the proposed new rules would raise the required minimum public float allowed from an IPO to $15 million for profitable companies, and to $25 million for Chinese companies.
For companies that fail to meet these new standards, immediate delisting could be a possibility. Companies must maintain a $1 share price and have a public float under $5 million to continue listing. Smaller companies that cannot reach the $25 million threshold may turn to the NYSE American exchange or seek a SPAC merger to meet the float requirements.
Among the largest Chinese companies recently delisted from Nasdaq are DigiAsia Corp., which voluntarily delisted by October 2, 2025, following a $400 million acquisition offer, and SU Group Holdings, a Hong Kong-based security engineering firm that received a delisting notice in September 2025 due to insufficient publicly held shares but is appealing the decision.
Speakers at the conference provided insights into how to build a following among overseas investors and get permission for a U.S. IPO from China's own regulators. Chinese companies looking for the prestige of the Nasdaq may seek deep-pocketed institutional investors instead of relying on smaller amounts of "friends and family."
For example, Fuyao, a Chinese auto glass maker, has opened a new U.S. plant and is eyeing smart vehicles. The chairman of an Apple supplier leads the new list of China's top businesswomen. Shares in Suzhou-headquartered biotech firm Ascentage Pharma Group have more than doubled since they started trading on the Nasdaq in January. Pony AI has gained about a third since it listed last November and turned its CEO James Peng into a billionaire.
In response to these changes, Chinese companies that have a hard time coming up with the $25 million may also look to restructure their ownership to reduce ties to mainland China, Hong Kong, and Macau, and build links to Singapore. This near-term "rush to market" by Chinese companies is expected due to the existing rules allowing a smaller public float that are set to change.
The speakers at the conference also offered advice on how to build a following among overseas investors. They emphasized the importance of a well-crafted investor pitch, clear and concise communication, and a strong understanding of the market. They also provided insights into how to navigate the regulatory landscape and secure the necessary approvals for a U.S. IPO.
In conclusion, the tightened listing rules by the Nasdaq for Chinese companies will undoubtedly raise the bar for IPOs. However, with the right strategies and preparations, Chinese companies can still secure a listing on the prestigious exchange and tap into the vast pool of overseas investors.
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