Have you ever wondered what it would take to have your dog grooming business publicly traded on the New York Stock Exchange (NYSE)?
Maybe you made $2,500 babysitting your neighbors’ kids last year and started thinking to yourself, “I could be the CEO of Nasdaq-listed ‘Babysitting Inc’! Wouldn’t that look nice on a resume?”
If you’ve ever thought about taking a business public, here are some listing requirements you should consider prior to your IPO.
NYSE
The absence of babysitting and lemonade stand companies on the NYSE is likely due to the exchange’s first listing requirement: $10 million in aggregate pre-tax earnings over the previous three years, including at least $2 million during the most recent year.
Listing can also be granted on a revenue basis for companies that are not earning positive income. The revenue exception requires a company to have $500 million in global market cap, at least $100 million in revenue in the most recent year and no negative cash flow in the most recent three years.
In addition to the performance requirements, a company must have a minimum of 400 shareholders, 1.1 million shares, a market cap of $40 million, and a share price of $4.00. Aside from those requirements, a company must file an assortment of paperwork, including a list of corporate bylaws, five years of shareholder reports and a proxy statement from the most recent shareholder meeting.
NASDAQ
If the NYSE listing standards are a bit much, maybe the Nasdaq is the right place for you. There are three performance scenarios in which companies can gain listing approval on the Nasdaq:
1. Pre-tax earnings of at least $2.2 million over the previous two years, $11 million over the previous three years and no year in the past three with a negative income.
2. Minimum aggregate cash flow over the past three years of at least $27.5 million, one-year market capitalization of at least $550 million and at least $110 million in revenue.
3. Twelve months of $850 million market cap and $90 million in revenue.
All Nasdaq-listed stocks must also meet government standards, and they must have at least three market makers, at least 1.25 million shares and a regular bid price of at least $4.00 per share.
Both the NYSE and Nasdaq have annual listing fees ranging from $27,500 to $500,000.
While the idea of going public with a company on one of the top two major American stock exchanges might sound glamorous, the reality is that the Nasdaq and the NYSE are serious business. Every company that is listed on either exchange meets rigorous screening standards and pays a hefty price for their ticker.
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