Nasdaq's plan to delist foreign companies whose market value falls below $5 million for 30 days has sparked backlash from small domestic firms. The proposal, part of a broader US effort to combat fraudulent trading in penny stocks, targets companies with volatile trading records and low market values. Critics argue it will scare off financing and strangle legitimate businesses whose thinly traded shares naturally experience big price swings.
US regulators hit pause on Nasdaq's proposal last month, opting for more public input. More than 190 Nasdaq-listed companies currently have market capitalizations of $5 million or less, with about a third based in Asia but nearly half based in the US. Denver-based Sea Star Medical Holding Corp., a developer of treatments for children with acute kidney injury, registered concerns with the SEC, noting its market value is three times above the proposed cutoff but briefly dipped below in 2023.
Nasdaq's plan, floated in January, is among several proposals embraced amid stepped-up scrutiny of stock manipulations fueled by social-media campaigns. The SEC has suspended trading in over a dozen tiny Asian companies this year. Citadel Securities supports the rule, while Charles Schwab Corp. has warned that overseas microcaps are easy targets for manipulators. The SEC has delayed final votes on both Nasdaq's and NYSE American's similar proposals.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing