By Liz Dunshee

In my January overview of Nasdaq’s market-quality proposals, I flagged proposed heightened initial listing standards for companies based in China, Hong Kong and Macau, which Nasdaq refers to as “China-based Issuers.” The SEC approved the revised rule on May 14, 2026, and Nasdaq Rule 5210(l) became operative on June 14, 2026.

The rule requires covered companies that are listing in connection with an IPO to raise at least $25 million in gross proceeds from US Public Holders in a Firm Commitment Offering (as defined in Nasdaq Rules 5005(a)(36) and 5005(a)(17)). Corresponding requirements would apply to China-based Issuers seeking to list in connection with de-SPACs and other change-in-control business combinations, direct listings, and companies uplisting from the over-the-counter (OTC) market or another national securities exchange.

Overall, the final rule is similar to Nasdaq’s September 2025 proposal, with one important change: Amendment No. 3 narrowed the “direct listing” path for China-based companies. A covered company may now pursue a direct listing only on the Nasdaq Global Select Market, not the Nasdaq Global Market or Nasdaq Capital Market.

Threshold question for initial listings: Where is the company based?

Before structuring a deal around the new $25 million thresholds, cross-border teams must first determine whether Nasdaq considers the company to be a China-based Issuer. In some situations, that can be a complex question. Rule 5210(l) applies to a company that is headquartered or incorporated in the People’s Republic of China, including Hong Kong and Macau, or “whose business is principally administered in one of those jurisdictions.”

In other words, incorporation and a headquarters address are only part of the analysis. Nasdaq will holistically analyze the facts and circumstances, including seven specified elements:

  1. Where the company’s books and records are located.
  2. Whether at least 50% of its assets are located in the jurisdiction.
  3. Whether at least 50% of its revenues are derived from the jurisdiction.
  4. Whether at least 50% of its directors are citizens of, or reside in, the jurisdiction.
  5. Whether at least 50% of its officers are citizens of, or reside in, the jurisdiction.
  6. Whether at least 50% of its employees are based in the jurisdiction.
  7. Whether the company is controlled by, or under common control with, specified persons or entities connected to the jurisdiction.

Under Nasdaq’s holistic analysis, no single factor is determinative. Nasdaq’s rule filing gives examples involving a company incorporated and headquartered outside China but with at least half of its senior management, employees and assets in China, as well as a company with books and records in Hong Kong and at least half of its revenues from Macau. These companies would be covered by Rule 5210(l).

Companies with distributed management and operations should expect the exchange to look at the full picture. Nasdaq also states that it may request additional information during the application process when public filings do not provide enough information to assess a factor. When possible, it’s a good idea to develop a coherent, supportable account of where the business is actually administered before the listing application raises the question.

Applying the new requirements: IPOs, de-SPACs and other initial listings

This is an initial listing rule, not a new continued listing standard, but its reach extends beyond a traditional IPO. It applies to covered companies entering Nasdaq through a de-SPAC or other change-in-control business combination, direct listing, uplisting from the OTC market or transfer from another national securities exchange. The transaction path dictates which hurdle applies (capitalized terms are defined in Nasdaq’s rules):

  • IPO. The company must conduct a Firm Commitment Offering in the US to Public Holders that produces at least $25 million in gross proceeds to the company.
  • Business combination. The post-combination company must have at least $25 million in Market Value of Unrestricted Publicly Held Shares.
  • Direct listing. The company may list only on the Nasdaq Global Select Market and must satisfy that market’s applicable standards plus IM-5315-1 – e.g., in the absence of sustained recent trading in the Private Placement Market, a Market Value of Publicly Held Shares of at least $250 million and a Market Value of Unrestricted Publicly Held Shares of at least $110 million (or $100 million if the company also has stockholders’ equity of at least $110 million). Direct listings on the Nasdaq Global Market and Nasdaq Capital Market are unavailable.
  • Uplisting or exchange transfer. The company must have at least $25 million in Market Value of Unrestricted Publicly Held Shares and must have traded on the other market for at least one year.

In addition to these requirements, a covered company must still satisfy every other applicable Nasdaq initial listing standard. If Nasdaq determines that a company is covered and the relevant heightened requirement is not met, Nasdaq will deny the listing application. The company can request review of the denial letter under Rule 5815.

What companies should do now

Companies that are planning a Nasdaq listing and have meaningful connections to China, Hong Kong or Macau should analyze whether Rule 5210(l) will apply, ideally before their transaction structure and timetable solidify. Useful early workstreams include:

  • Map each of the seven factors for the current organization and the expected post-transaction structure.
  • Identify the supporting data, measurement date and source for each 50% threshold, then check that the analysis aligns with public disclosure and corporate records.
  • Model the economics of the intended listing path, including gross proceeds, unrestricted public float and any seasoning period.
  • Confirm that the intended Nasdaq market tier and transaction route remain available if the company is covered.
  • Raise mixed or evolving facts with Nasdaq early and leave room in the timetable for follow-up questions.

For more information, please email the Cooley capital markets team or visit Cooley’s capital markets practice group page.

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