Nasdaq Inc (NASDAQ:NDAQ) has proposed amendments to its rules on penny stocks, aiming to implement a faster and more stringent delisting process for non-compliant companies. According to a filing posted on the exchange operator's website on Thursday, the changes could significantly alter the current procedures for companies failing to meet the minimum price requirement.
Currently, Nasdaq mandates that listed companies maintain a closing price above $1 per share. Companies falling below this threshold for 30 consecutive trading days are considered non-compliant and are given 180 days to regain compliance. If the stock price does not recover within this period, companies can request an additional 180-day compliance window.
However, under the proposed amendments, Nasdaq would suspend companies from trading if their share price remains below $1 after 360 trading days, eliminating the option to appeal. The exchange also plans to immediately issue a delisting determination to any company that has undergone a reverse stock split within the previous year and still fails to maintain the $1 minimum.
The filing notes that some companies, particularly those in financial distress, engage in repeated reverse stock splits to temporarily boost their stock price.
"Nasdaq believes that such behaviour is often indicative of deep financial or operational distress within such companies, rendering them inappropriate for trading on Nasdaq for investor protection reasons," the filing states.
The proposed rule changes are now subject to approval by the US Securities and Exchange Commission (SEC).
Nasdaq declined to comment when contacted by Reuters.