What Is the Nasdaq Capital Market?

The Nasdaq Capital Market is one of the market levels that the NASDAQ operates in the United States. This includes businesses that are still in their infancy and have very small market capitalizations. On the NASDAQ return, the Nasdaq-CM listing tier is one of the three available options. This is for businesses that are looking to raise capital. Companies that want to be listed on the Nasdaq Capital Market have to meet fewer stringent requirements than companies that want to be listed on the other two levels of the NASDAQ market, which focus on larger companies with greater market capitalization. The Nasdaq Capital Market is for companies with a market capitalization of less than $5 billion. It is essential to keep in mind that the market capitalization of a firm only represents the value of its equity.

Learning the NASDAQ Capital Market

The Nasdaq Capital Market used to be called the Nasdaq Small-Cap Market before 2005. "Small-cap" stocks make up most of the stocks in this market. The name change indicated that the emphasis had changed to establishing firms that needed to seek funds. Its purpose is to make it simpler for a small business or a SPAC (Special Purpose Acquisition Company) to be listed on the NASDAQ and acquire capital to expand. Even though the requirements for getting on the NASDAQ are less strict initially, all tiers need the same level of corporate governance to stay on the exchange. This implies that firms listed on the Nasdaq Capital Market must-have items like an ethical code of conduct, an audit board, directors, and so forth.

NASDAQ Capital Market Listing Regulations

Getting listed on the Nasdaq Capital Market is easier for early-stage companies than on other major exchanges with stricter rules. Businesses must achieve all of the criteria for at least one of three listing requirements to list on the Nasdaq Capital Market for the very first time: the equity level, the market price of issued assets standard, and the net assets earnings standard. A few of the necessities for all of the guidelines are the same, such as possessing one million shares that are traded openly, 300 stockholders, as well as three MMs (Market Makers). But they are also very different in important ways. The equity norm needs $5 million in shareholders' assets, whereas the other two only need $4 million. It also says the business must have been open for two years, which the others don't.

The market value of securities traded needs to be $50 million, as well as the market price of publicly owned shares needs to be $15 million. The sole one that needs a total income of $750,000 during the previous fiscal year and in two of the last three years is the total revenue standard. But the market value of the stock held by the public requires $5 million, which is the smallest of the three requirements. Although businesses can select the standard that truly works for them, the listing norms and needed governance are tighter than in certain early-stage financial markets. Companies that want to list on the Nasdaq Capital Market usually go above and beyond the minimum requirements before they decide to list. This is because meeting these standards costs money.

NASDAQ Composite Index

The NASDAQ (National Association of Securities Dealers Automated Quotation) Composite Index is a stock market index that includes common stocks and other similar securities traded on the NASDAQ stock market. It is made up of more than 3,000 parts, all of which are stocks that are traded on the Nasdaq Exchange. The Nasdaq Composite Index has three levels: the Global Market, the Global Select Market, and the Capital Market. Two main things make up the Nasdaq Composite Table.

First, a stock can only be in the Nasdaq Composite Index if it is only traded on the NASDAQ stock market. Second, you can only use common stock, ordinary shares, Limited Partnership Interests, ADRs (American Depositary Receipts), SBIs (Shares of Beneficial Interest), and REITs (Real Estate Investment Trusts), and tracking stocks. It's important to know that security is immediately taken off the list if it stops meeting the two requirements.

NASDAQ Listing Tiers

Companies that are listed on the NASDAQ can be in one of three groups:

Nasdaq Capital Market used to be called the Nasdaq Small-Cap Market, which was for small businesses.
About 1,450 mid-cap stocks that used to be on the Nasdaq National Market are now on the Nasdaq-NM (Nasdaq Global Market).
The new level is Nasdaq Global Select Market. It used to be a part of the Nasdaq National Market, with about 1,200 large-cap companies.

For each tier, you need a different amount of paperwork, a certain number of shareholders, and an average market capitalization over the last month. Companies can move from one tier to the next, depending on how well they meet the requirements. Nasdaq Global Select, the highest level, usually has about 1,200 companies listed, while the lower levels have between 1,000 and 1,500 companies each.