SEC Approves Nasdaq’s New US$25 Million IPO Threshold for China-Based Companies

The U.S. Securities and Exchange Commission (SEC) has approved a significant change to Nasdaq’s listing rules that will make it more challenging for some smaller China-based companies to access U.S. capital markets. Beginning in mid-2026, companies primarily operating in Mainland China, Hong Kong or Macau, will generally need to raise at least US$25 million in a Nasdaq initial public offering (IPO) to qualify for listing. 

The rule represents one of the most substantial tightening measures directed at Chinese issuers in recent years and reflects growing concerns among U.S. regulators about market manipulation, investor protection, and regulatory oversight of foreign-listed companies. 
 Why Nasdaq Introduced the New Requirement
Nasdaq and the SEC have pointed to a pattern of problems involving small-cap Chinese issuers listed in the United States. According to the SEC approval order, approximately 70% of Nasdaq's referrals to regulators concerning suspected market manipulation between August 2022 and April 2025 involved Chinese companies, despite such companies representing less than 10% of Nasdaq-listed issuers. 
Regulators have become increasingly concerned about:
•	Extremely small IPOs with limited public float. •	Thin trading volumes. •	Concentrated shareholder bases. •	Alleged "pump-and-dump" schemes. •	Difficulties in enforcing U.S. securities laws against companies operating primarily in China. 
Nasdaq has argued that larger IPOs generally produce a broader shareholder base and greater market liquidity, reducing opportunities for manipulation. 
 Key Features of the New Rule
Under new Nasdaq Rule 5210(l), China-based companies seeking an IPO on Nasdaq must:
•	Conduct a firm-commitment underwritten offering. •	Raise at least US$25 million in gross proceeds to public investors. 
The rule also imposes heightened requirements on:
- Business Combination Listings: Companies listing through mergers or similar transactions must maintain a minimum market value of unrestricted publicly held shares of at least US$25 million following the transaction. 
- Direct Listings: China-based issuers will no longer be permitted to directly list on the Nasdaq Global Market or Nasdaq Capital Market. Instead, they may only pursue direct listings on the Nasdaq Global Select Market, which has substantially higher entry standards. 
- Transfers from Other Markets: Companies transferring from OTC markets or other exchanges must have traded on the prior market for at least one year and satisfy the US$25 million public-float requirement. 
 Which Companies Are Covered?
The rule extends beyond companies incorporated in mainland China.
It applies to issuers headquartered, incorporated, or principally administered in:
•	Mainland China •	Hong Kong •	Macau 
Nasdaq also retains discretion to apply the rule where substantial connections to China exist, including where a majority of assets, revenues, directors, officers, or employees are located in China. 
As a result, some offshore holding companies using Cayman Islands or British Virgin Islands structures could still fall within the rule if their operations remain predominantly China-based. 
 Practical Impact on Chinese Companies
The most immediate effect will be on smaller growth-stage businesses that historically relied on modest U.S. IPOs to obtain a Nasdaq listing.
Many Chinese companies that completed Nasdaq offerings in recent years raised less than US$25 million. Those issuers may now find U.S. listing options significantly more limited. 
The rule is expected to:
•	Reduce the number of very small Chinese IPOs reaching Nasdaq. •	Increase underwriting and compliance costs for prospective issuers. •	Encourage some companies to pursue larger offerings. •	Potentially redirect listings toward Hong Kong or domestic Chinese exchanges. 
 Broader Regulatory Context
The rule should be viewed as part of a broader trend of heightened scrutiny of Chinese issuers in U.S. markets.Over the past several years, U.S. regulators have introduced stricter auditing oversight requirements, increased enforcement activity, and devoted greater resources to investigating cross-border securities violations. The SEC has also established a Cross-Border Task Force to address risks associated with foreign-based issuers.  At the same time, Chinese regulators have increased their own review of offshore listings, creating a more complex environment for companies seeking access to international capital markets. 