John shared encouraging stats last week for IPO momentum heading into 2026. If you’re planning an IPO in the near future, you should know that there is also a focus on market quality alongside the push to “Make IPOs Great Again” (in contrast to poor framing by the WSJ).

The latest example happened last week, when the SEC posted notice & immediate effectiveness of a Nasdaq proposal that expands the exchange’s ability to deny an initial listing based on the risk of price manipulation by third parties. This Mayer Brown blog summarizes the update:

Under the proposal, Nasdaq would adopt new interpretive material, IM‑5101‑3, under Nasdaq Rule 5101 that would permit it to deny an initial listing if it determines, based on a qualitative assessment, that the company’s securities are susceptible to manipulation or present comparable risks. This authority would apply even if the issuer otherwise meets Nasdaq’s existing listing requirements.

Nasdaq explains that the change would allow consideration of broader risk indicators suggesting susceptibility to problematic or unusual trading. Under the proposed rule, if Nasdaq denies a listing pursuant to this authority, it must issue a written determination explaining the basis for its decision. The issuer would have the right to appeal the determination to a Nasdaq hearings panel and would be required to publicly disclose the denial and the concerns identified by Nasdaq.

Nasdaq’s rule change aligns with the SEC’s recent trade suspensions based on alleged market manipulation – as the WSJ article had noted, there have been at least 12 trading suspensions since September, which is more suspensions than the previous 4 years combined.

It also follows other recent efforts by Nasdaq to clean up penny stocks. Meredith shared the proposals in real time earlier this fall, and now the SEC has:

– Initiated proceedings to determine whether to approve or disapprove a proposal to adopt additional initial listing criteria for companies primarily operating in China

– Approved a proposal, as amended, to amend certain initial listing requirements for de-SPAC transactions

– Approved a proposal, as amended in its entirety, to increase the minimum market value of unrestricted publicly held shares for companies that are pursuing an initial listing under the net income standard on either the Nasdaq Capital Market or the Nasdaq Global Market

When it comes to Nasdaq’s expanded discretion to consider the risk of manipulation during the initial listing process, the Mayer Brown blog shares these thoughts on what companies and their counsel should do:

For issuers seeking an initial Nasdaq listing, the proposal underscores the importance of assessing qualitative risk factors alongside technical listing compliance. In-house counsel and management may wish to consider whether ownership structures, jurisdictional features, public float characteristics, management experience, or the regulatory history of advisors involved in the offering could raise concerns under the proposed framework.

Advisors should also be mindful that Nasdaq may consider broader market patterns and past outcomes associated with similar listings when reviewing applications, rather than focusing exclusively on issuer-specific facts. Issuers and their advisors should consider how this expanded authority, if approved, could affect listing readiness, timing, and engagement with the exchange during the application process.

– Liz Dunshee