The Nasdaq stock exchange is cracking down on ‘pumpers and dumpers’ by requiring $25 million in proceeds from Chinese companies looking to list.
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As part of a raft of new listing rules the Nasdaq is looking to avoid “pump and dump” schemes involving small stocks on the market. As such it is imposing a $25 million minimum public offering proceeds requirement for new listings of companies principally operating in China.
Fraudster Moves
Pump and dump schemes are usually run by fraudsters. According to the US Securities and Exchange Commission, they typically spread false or misleading information to create a buying frenzy that will “pump” up the price of a stock and then “dump” shares of the stock by selling their own shares at the inflated price. Once the fraudsters dump their shares and stop hyping the stock, the stock price typically falls and investors lose money.
Other reforms include a $15 million minimum market value of public float, applicable to new listings on Nasdaq under the net income standard and n accelerated process for suspending and delisting companies with a listings deficiency that also have a Market Value of Listed Securities below $5 million.
“It provides a healthier liquidity profile for public investors, while still making emerging companies available to investors through our exchange,” Nasdaq Executive Vice President and Global Chief Legal, Risk & Regulatory Officer John Zecca said. “Investor protection and market integrity are central to Nasdaq’s mission.
IPO Market
Nasdaq is submitting the proposed rules to the SEC for review. Nasdaq will give companies already in the initial listing process a period of 30 days to complete the process under the prior standards, and thereafter all new listings will have to meet the new requirements.
It comes as the IPO market begins to rebound despite continued economic and political volatility.
The year has already seen several large and successful IPOs from companies such as CoreWeave (CRWV) – see above chart – and Circle Internet Group (CRCL). However, analysts say that the IPO train is just getting started and that new stock issuance is popular again.
Swedish Buy Now, Pay Later giant Klarna has announced the launch of its New York IPO, valuing the company at $14 billion.
Several other companies have filed with the U.S. Securities and Exchange Commission (SEC) to go public in coming months, including cryptocurrency exchange Gemini and blockchain lender Figure. Find out more via our IPO Calendar.
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