NASDAQ listing: Overview, definition, and example
What is a NASDAQ listing?
NASDAQ listing refers to the process by which a company's shares are publicly listed and traded on the NASDAQ stock exchange. It involves meeting specific financial, governance, and regulatory requirements set by NASDAQ. In a contract, a NASDAQ listing clause typically confirms the company’s listing status or outlines obligations related to the listing and compliance with NASDAQ’s rules.
Why is a NASDAQ listing important?
A NASDAQ listing offers visibility, credibility, and liquidity for a company’s shares. For investors, it means access to a regulated and transparent market. For the company, it requires ongoing compliance with NASDAQ’s stringent reporting and governance standards. If a company risks delisting, it could negatively impact stock prices and investor confidence. The clause ensures the company remains committed to maintaining the listing.
Understanding a NASDAQ listing through an example
A company planning to go public enters into an agreement with an investor. The contract includes a NASDAQ listing clause, which states that the company must secure a NASDAQ listing within a set period. If the company fails to complete the listing, the investor has the right to terminate the agreement or renegotiate terms.
Example of a NASDAQ listing clause
Here's an example of how a NASDAQ listing clause may appear in a contract:
"The Company agrees to apply for listing of its Common Stock on the NASDAQ Stock Market and to take all necessary actions to maintain such listing throughout the term of this agreement, subject to applicable laws and regulations."
Conclusion
A NASDAQ listing clause sets clear expectations for the company's efforts to list and maintain its shares on NASDAQ. It ensures compliance with exchange requirements and provides protection for investors by securing access to a transparent and regulated market. If your agreement involves public offerings or future listings, this clause is essential to manage legal and operational requirements effectively.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.