May 31, 2020  
 
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Going Public

 

Requirements For A Business To Go Public

Can a small business go public on the NYSE or NASDAQ stock market exchanges? Not unless you meet minimum capitalization and revenue requirements. Going public has its benefits -- but it has its prerequisites, too. Here's what they are . . .

Small business owners often dream about taking their companies public.
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An IPO attracts capital and generates wealth. As an added bonus, your ticker listing on the stock exchange will make your competitors green with envy.

But for most small businesses, an IPO will never be a reality. The process for publicly listing a company is thorough, but navigable. The real obstacles are the requirements for a business to go public. Each stock exchange has its own initial listing requirements and some are more stringent than others:

New York Stock Exchange (NYSE)

NYSE is by far the most demanding stock exchange when it comes to initial listing requirements. It requires companies who pursue an IPO to demonstrate pretax income of $4.5 million in the previous year or $6.5 million in pretax income (over the past three years, a tall order for any small company. Additionally, the company must meet shareholder requirements and have $60 million IPO market value or $100 million market value for public shares.

NASDAQ

Although substantial, NASDAQ listing requirements are less stringent than NYSE requirements. Companies are required to have net tangible assets worth at least $6 million and net income (for the most recent year or at least two out of the three previous years) of at least $1 million. Market value minimum is set at $8 million and requires at least 400 shareholders. It's also possible to qualify for NASDAQ's small cap market if you have $4 million in net tangible assets, $50 million market capitalization or at least $750,000 of net income.

American Stock Exchange (AMEX)

AMEX has both regular financial guidelines and alternate financial guidelines for companies seeking an initial listing. Regular financial guidelines specify a pretax income of at least $750,000 (the most recent year or at least two out of the three previous years), public float market value of at least $3 million, $3 minimum initial bid price and $4 million in stockholder equity. The alternate guidelines allow companies to still be listed on AMEX if they don't meet the pretax income requirements, but have a $15 million public float, $3 minimum initial bid and $4 million in stockholder equity.

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Direct Public Offerings
How to Go Public on the NYSE
The Market For Initial Public Offerings


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