Nasdaq’s Public Float Requirements in De-SPAC Transactions: A Practical Overview
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Questions around Nasdaq listing compliance continue to arise as SPAC transactions operate under increasingly tight regulatory and market discipline. One of the most consequential recent developments is Nasdaq’s renewed emphasis on public float rather than cash held by the company. When evaluating compliance with the Market Value of Unrestricted Publicly Held Shares requirement, Nasdaq focuses exclusively on the market value of freely tradable public shares remaining after redemptions.
This blog explains the regulatory framework underlying Nasdaq’s public float requirements, highlights recent SEC-approved rule changes, and clarifies why trust account cash does not automatically satisfy the public float requirement in de-SPAC transactions.
Nasdaq’s Market Value of Unrestricted Publicly Held Shares Requirement
The Market Value of Unrestricted Publicly Held Shares Standard
Under Nasdaq Listing Rule 5505(b), a company applying for initial listing on Nasdaq must satisfy a minimum Market Value of Unrestricted Publicly Held Shares the “MVUPHS”). Nasdaq Rule 5005(a)(46) defines Unrestricted Publicly Held Shares as shares that are not held by officers, directors, or ten percent (10%) shareholders and that are not subject to resale restrictions.
The calculation is straightforward. Nasdaq measures the number of unrestricted publicly held shares multiplied by the market price per share. The purpose of this requirement is to ensure that a newly listed company has sufficient public float to support orderly trading, liquidity, and price discovery following listing.
Importantly, the analysis is share-based rather than cash-based. Nasdaq’s focus is on tradable equity in the market, not on capital sitting in escrow or trust accounts.
Recent Nasdaq Rule Changes Approved by the SEC
In March 2025, the SEC approved Nasdaq’s modification to its liquidity requirements for companies listing in connection with an IPO (Release No. 34-102622). Following that change, shares registered for resale no longer count toward satisfying the minimum MVUPHS requirement. As a result, companies must meet the public float threshold based on shares sold in the offering.
Nasdaq subsequently observed trading challenges in companies with very limited public float, particularly those listing on the Nasdaq Capital Market with only five million (5M) dollars in MVUPHS. Nasdaq expressed concern that such low public float levels may not support effective price discovery or stable trading.
On December 18, 2025, the SEC approved Nasdaq’s further amendments to its listing rules (Release No. 34-104450). Under newly approved Rule 5505(b)(3)(C), the minimum MVUPHS for companies listing under the Net Income Standard on the Nasdaq Capital Market increased from five million (5M) dollars to fifteen million (15M) dollars. This change becomes operative thirty days following SEC approval.
How Nasdaq Evaluates Public Float in De-SPAC Transactions
Nasdaq’s Focus on Tradable Public Float
Nasdaq’s MVUPHS requirement is designed to assess whether there is a sufficient volume of freely tradable shares available to the public after listing. Cash held in a SPAC’s trust account does not represent publicly tradable equity and therefore does not factor into the calculation.
In a de-SPAC transaction, redemptions directly reduce the number of public shares outstanding. Even if substantial funds remain in the trust account, Nasdaq will evaluate only the market value of the remaining unrestricted public shares at or around closing.
As a result, a company may fail to meet Nasdaq’s public float requirements despite having significant cash on hand if redemptions reduce the number of publicly held shares below the applicable threshold.
De-SPAC Execution Risk Following Heavy Redemptions
This framework creates a critical execution risk for de-SPAC transactions. If redemptions are high, the remaining public float may shrink to a level that fails to satisfy Nasdaq’s MVUPHS requirement. Under the newly approved fifteen million dollar threshold, this risk is heightened for transactions with limited non-redeeming shareholders.
Even where a SPAC retains substantial trust account cash, Nasdaq will not treat that cash as a substitute for public float. Compliance hinges on the value of freely tradable shares, not on balance sheet liquidity.
Practical Implications for SPAC Transactions
Impact on De-SPAC Structuring
These rule changes do not target SPACs specifically. Instead, they reflect Nasdaq’s broader emphasis on post-listing liquidity and trading quality across all newly listed companies. In practice, however, the rules narrow the range of SPAC transactions that can successfully close and remain listed.
Transactions that preserve sufficient public float through lower redemptions, committed investors, or other structural features are more likely to meet Nasdaq’s listing standards. Transactions that result in minimal public float face increased risk, regardless of the size of the trust account.
Market Discipline and Selectivity
The revised MVUPHS requirements encourage greater selectivity in SPAC deal-making. Sponsors and targets must account for public float sustainability alongside valuation, financing, and closing conditions. The focus shifts from simply closing a transaction to ensuring that the post-combination company can trade in an orderly and liquid market.
Practical Takeaways for Market Participants
The recent Nasdaq rule changes underscore a clear regulatory principle. Public float matters more than cash held in trust. For de-SPAC transactions, trust account balances do not necessarily offset deficiencies in public float when assessing listing compliance.
As a result, SPAC transactions that can maintain adequate public float at closing are better positioned to satisfy Nasdaq’s requirements, while transactions with extreme redemption profiles face greater execution risk.
Final Thought
Nasdaq’s treatment of public float reflects a broader regulatory focus on liquidity, price discovery, and market integrity. While the SPAC structure remains viable, the pathway to a successful de-SPAC listing is more disciplined than in prior cycles.
Sponsors, targets, and advisors should assess public float outcomes early in transaction planning and evaluate whether redemption scenarios could affect listing compliance.
If you would like to discuss how Nasdaq’s public float requirements may affect a de-SPAC transaction or listing strategy, our team at Torres & Zheng is available to assist.
Authors: Nick L. Torres, Esq. and Weiwei Lu
Contact Person: Nick L. Torres, Esq. and Zhiqi Zheng, Esq.
Written By Nick L. Torres, Esq.
Nick L. Torres, Esq., founder and managing partner of Torres & Zheng at Law, P.C. (T&Z Business Law), specializes in China-related corporate and securities transactions, including venture capital, private equity, M&A, and securities offerings, with expertise in Restaurant Law and China Practice.
