Nasdaq’s New $25 Million Listing Standard for China-Based Companies: What Executives Need to Know

Effective Date: Anticipated Mid-June 2026

On May 14, 2026, the U.S. Securities and Exchange Commission (the “SEC”) approved a significant change to Nasdaq’s listing standards that will affect how certain China-based companies access Nasdaq’s U.S. public equity markets. Under new Nasdaq Rule 5210(l), China-based companies—including those headquartered or incorporated in mainland China, Hong Kong, or Macau—must raise at least $25 million in gross proceeds in a firm commitment underwritten IPO to qualify for an initial Nasdaq listing. The rule provides for a 30-day implementation period, meaning that the rule’s effective date is expected to fall in mid-June 2026, subject to Nasdaq’s operative-date notice and any applicable transition guidance. This implementation delay is intended to provide companies currently in the IPO pipeline that have taken substantial steps toward listing under existing rules an opportunity to complete that process before the new requirements take effect. Companies contemplating a U.S. listing should evaluate their plans promptly, including whether the rule applies based on filing date, approval date, pricing date, or listing date.

Who Is a “China-Based Company”?

The rule applies to any company that is headquartered or incorporated in China, including Hong Kong and Macau, or whose business is “principally administered” in one of those jurisdictions. Nasdaq also retains authority to apply the rule to other issuers—including those incorporated in offshore jurisdictions such as the Cayman Islands or the British Virgin Islands—based on a multi-factor analysis that includes, among other factors, the location of the company’s books and records; whether at least 50% of its assets or revenues are located in or derived from China; whether at least 50% of its directors, officers, or employees are located in, resident in, or citizens of China, as applicable; and whether the company is controlled by persons whose business is principally administered in China. This broad scope means that a company incorporated in the Cayman Islands with a variable interest entity structure directing operations in mainland China may be classified as China-based, depending on the facts and Nasdaq’s application of the multi-factor analysis.

What the Rule Requires

Nasdaq Rule 5210(l) introduces a separate, heightened set of initial listing standards that apply to companies meeting Nasdaq’s definition of a China-based company, including certain companies headquartered, incorporated, principally administered, or otherwise sufficiently connected to China, Hong Kong, or Macau. The requirements vary depending on the method a company uses to access the Nasdaq market, imposing heightened listing standards on China-based companies for IPOs, business combinations (including de-SPAC transactions), direct listings, and transfers from OTC markets and other exchanges. The new requirements supplement, and do not replace, Nasdaq’s other initial listing standards and discretionary authority. The rule is not retroactive and should not, by itself, cause currently listed issuers to be delisted solely because their IPO proceeds were below $25 million, although those issuers remain subject to Nasdaq’s other continued listing and discretionary authority standards. Nasdaq has indicated that approximately 143 currently listed China-based issuers had IPO values below $25 million. Specifically, Nasdaq’s analysis of IPOs from April 2022 to April 2025 found that of the 151 companies headquartered or incorporated in China that listed on Nasdaq through an IPO, 143 had offering amounts of less than $25 million, and nearly half of those 143 companies were subsequently cited for failure to comply with Nasdaq’s continued listing standards.

Initial Public Offerings: A China-based company seeking to list through an IPO must conduct a firm commitment underwritten offering resulting in gross proceeds of at least $25 million.

Business Combinations: For China-based companies that list through a business combination—such as a merger with a special purpose acquisition company, commonly known as a SPAC—the combined entity must satisfy Nasdaq’s applicable $25 million minimum market value of unrestricted publicly held shares (“MVUPHS”) requirement at the relevant measurement time specified in Rule 5210(l), in addition to all other applicable initial listing standards.

Direct Listings: China-based companies are prohibited from listing on the Nasdaq Global Market and the Nasdaq Capital Market via direct listing. Direct listing remains available on the Nasdaq Global Select Market for China-based companies, subject to that market’s separate initial listing standards and Nasdaq’s discretionary authority. The Nasdaq Global Select Market has more stringent financial and governance requirements than the Nasdaq Global Market and Nasdaq Capital Market.

Transfers from OTC Markets or Other Exchanges: A China-based company seeking to transfer its listing to Nasdaq must satisfy the applicable one-year trading and $25 million MVUPHS requirements, as well as Nasdaq’s other initial listing standards.

Key Considerations for China-Based Companies

Liquidity Risk: For many early-stage investors in Chinese companies, a U.S. IPO on Nasdaq has historically served as a primary exit mechanism. The new $25 million minimum materially narrows this pathway for smaller companies that previously relied on sub-$25 million IPOs to provide liquidity to their investors. Combined with the prohibition on direct listings on the Nasdaq Global Market and Nasdaq Capital Market, and the one-year seasoning requirement for transfers from OTC markets, the rule significantly narrows the menu of U.S. public market exit options. Companies that cannot meet the $25 million threshold may need to pursue alternative strategies—whether listing on non-U.S. exchanges, pursuing private sales, delaying a listing, or scaling their businesses to a size that supports a larger offering.

The approval and adoption of Nasdaq Rule 5210(l) did not occur in a vacuum. This development comes amid heightened regulatory scrutiny of China-based companies, reported Nasdaq delistings and enforcement referrals involving China-based companies, and increased U.S. federal securities class action activity involving China-based companies. In particular, recent shareholder litigation filed between late 2025 and early 2026 suggests that post-IPO price volatility involving China-based or China-connected companies may increase litigation risk. These lawsuits may name not only the issuing companies and their executives but also, depending on the facts, offering participants such as underwriters and auditors. Serving as an underwriter or auditor of a U.S.-listed China-based entity may therefore carry increased exposure to U.S. securities litigation, with attendant costs, reputational harm, and potential liability. The rule may cause underwriters, auditors, and other gatekeepers to apply heightened diligence and selection criteria to China-based issuers seeking U.S. listings, which could further tighten access to U.S. markets.

Shareholder Litigation Risk: As noted above, recent shareholder litigation involving China-based issuers has named officers and directors in some cases, underscoring the need to evaluate disclosure controls, indemnification arrangements, and directors’ and officers’ insurance. Serving as an officer or director of a China-based issuer may present increased U.S. securities litigation exposure, depending on the issuer’s disclosures, trading profile, offering structure, and insurance and indemnification protections.

Increased Regulatory Scrutiny: While not retroactive, Nasdaq Rule 5210(l) signals a significant shift in the regulatory environment for China-based issuers. Nasdaq is not the only U.S. regulator or policymaking body focusing on risks associated with China-based issuers. In September 2025, the SEC formed a Cross-Border Task Force within its Division of Enforcement. While the announced initial focus of the Cross-Border Task Force is on market manipulation—particularly pump-and-dump and ramp-and-dump schemes—in relation to foreign companies accessing U.S. markets, the announcement identifies China as a jurisdiction of particular concern. Additionally, the U.S. House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party has sent letters demanding records about the underwriting of IPOs by China-based issuers from multiple small investment banks. Congressional oversight activity may increase diligence burdens and reputational sensitivity, although such inquiries do not themselves create new listing standards. The combined effect of SEC enforcement activity, Congressional oversight, Nasdaq’s rulemaking, and Nasdaq delisting activity involving China-based companies creates a regulatory environment in which every stage of the listing process, from pre-IPO due diligence through post-listing trading, may face heightened scrutiny.

Other Regulatory and Disclosure Considerations: China-based issuers should also assess PRC filing, approval, cybersecurity, data-security, and outbound-listing requirements as part of their offering timeline and risk-factor review. Issuers should continue to evaluate audit-inspection, PCAOB, and cross-border enforcement disclosure issues where applicable. Market participants should review the SEC approval order, Nasdaq rule filing, and any Federal Register notice for the operative date, transition mechanics, and any further guidance relevant to pending Nasdaq applications. Additionally, market participants should monitor developments regarding the Holding Foreign Companies Accountable Act, which requires delisting of companies whose auditors cannot be fully inspected by the PCAOB.

Key Takeaways for Executive Decision-Making

The convergence of Nasdaq’s new listing standards, the SEC’s Cross-Border Task Force, Congressional oversight of underwriters, and recent shareholder class action activity means that the cost, complexity, and risk of a U.S. listing for a China-based company have increased substantially. Companies contemplating a Nasdaq IPO before or shortly after the anticipated mid-June 2026 operative date should promptly assess whether their planned offering can meet the $25 million gross proceeds threshold and confirm how Nasdaq will apply the rule to pending applications. Those that cannot meet the threshold should evaluate alternative listing venues, delayed offerings, private liquidity alternatives, or other transaction structures. Companies that do proceed with a U.S. listing should invest in robust disclosure practices, particularly with respect to risk factors addressing market manipulation, low-float structures, cross-border enforcement limitations, PRC regulatory approvals, cybersecurity and data-security issues, and audit-inspection matters, to mitigate disclosure-related litigation risk. Finally, executives and directors should ensure they have appropriate directors’ and officers’ insurance coverage, indemnification arrangements, and disclosure controls given the elevated litigation and regulatory environment.

This summary is provided for informational purposes only and is not intended to constitute legal advice nor does it create an attorney-client relationship with Rimon, P.C. or its affiliates.

This article was authored by Charlotte Westfall and James Ballard.

Rimon’s Securities and Capital Markets attorneys have decades of experience representing sponsors, issuers, investment banks, underwriters, and shareholders operating across a wide variety of industries in connection with major securities offerings as well as regulatory and compliance issues.  As a truly global firm, we have attorneys located in all the key international financial centers and have extensive experience representing our clients in cross-border capacities. Read more here