Structural Advantages and Evolving Standards for Nasdaq Listings: IPO and SPAC Pathways in Context

As U.S. capital markets continue to evolve, companies evaluating a Nasdaq listing face both structural advantages and increasingly refined regulatory standards. At the same time, alternative pathways such as SPAC transactions have become part of the broader capital markets landscape.

This article outlines the structural advantages of a Nasdaq listing, recent changes affecting traditional IPOs, the role of SPACs as an alternative route, and the broader context of the U.S. capital markets environment.

Structural Advantages of Listing on Nasdaq

Disclosure-Oriented Regulatory Model Emphasizing Transparency and Ongoing Compliance

At the institutional level, Nasdaq operates under a disclosure-based regulatory framework that emphasizes transparency and continuous compliance obligations. During the listing process, companies must fully disclose risk factors, shareholding structure, financial information, and potential compliance issues. After listing, companies must continue to fulfill ongoing disclosure obligations.

Compared to regulatory models that focus primarily on pre-listing rectification and approval, this disclosure-oriented framework places greater emphasis on market transparency and continuous supervision. For companies, it provides clearer rules and greater predictability within an established regulatory structure.

Institutional Pathway Advantage for Future Hong Kong Secondary Listing

Another structural advantage lies in institutional connectivity. After completing a U.S. listing, a company that later considers listing in Hong Kong may apply under the Hong Kong Stock Exchange’s secondary listing framework.

Compared to a primary listing, secondary listings may provide certain institutional alignment advantages in financial and compliance requirements. This creates a feasible pathway for companies seeking to establish a dual-market capital structure and enhances strategic flexibility in international capital markets planning.

China as a Major Source of U.S. Foreign Private Issuers

From a market structure perspective, China has long been one of the most significant sources of foreign private issuers in the United States. In terms of scale and activity, Chinese companies have consistently ranked among the most prominent foreign issuer groups in the U.S. capital markets.

This indicates that the U.S. market does not impose structural exclusion on qualified Chinese companies. Rather, it places emphasis on governance standards, information disclosure, and ongoing compliance capability. For companies with sound compliance foundations and clear corporate structures, Nasdaq remains a mature, deep, and globally influential financing platform.

Impact of Recent Nasdaq Rule Changes on Small-Cap Traditional IPOs

Nasdaq has recently tightened certain IPO standards, with more pronounced effects on smaller-cap companies.

Increase in Public Float Market Value Threshold

Previously, companies qualifying under the net income listing standard were required to maintain a minimum market value of publicly held shares of $5 million. This threshold has now increased to $15 million.

This means that companies must not only demonstrate profitability but also achieve a higher level of market recognition, effectively raising the entry threshold for traditional IPOs.

Expanded Discretionary Authority Under IM-5101-3

Effective December 19, 2025, Nasdaq has expanded discretionary authority under IM-5101-3 to deny IPO applications even if objective listing standards are technically met.

In exercising this discretion, Nasdaq may evaluate:

• Jurisdictional risks, with particular attention to China-based companies
• The quality and track record of intermediaries such as auditors, underwriters, and legal counsel
• Shareholding structure and liquidity, including risks of excessive concentration or potential market manipulation
• Management experience, particularly experience operating a U.S. public company

As a result, meeting quantitative standards alone may no longer be sufficient for listing approval.

Proposed Public Offering Proceeds Requirement for China-Based Companies

On September 3, 2025, Nasdaq proposed a rule that would apply specifically to companies whose principal operations are in China. The proposal has not yet become effective.

If adopted, it would require such companies to raise a minimum of $25 million in gross proceeds from their initial public offering. This requirement could significantly limit the feasibility of traditional IPOs for smaller-cap China-based companies.

Alternative Pathway: SPAC Transactions

In addition to the traditional IPO route, many companies consider SPAC transactions as an alternative pathway to public listing.

SPAC Listing Requirements

A SPAC must satisfy exchange listing standards. For example, under Nasdaq Global Market requirements applicable to SPACs, a SPAC typically must have at least $100 million in total listed securities market value and at least $80 million in market value of publicly held shares.

The substantial capital raised by SPACs does not necessarily reflect the valuation of an operating company, but rather results from the structural design of the SPAC model, capital market dynamics, and risk allocation mechanisms. Investor funds are placed into a trust account and may be redeemed under specified conditions.

In relative terms, the SPAC structure is designed to facilitate capital raising at the initial stage compared to a traditional IPO. Even at the de-SPAC stage, despite potential redemptions, the overall ability to meet listing standards may be comparatively more achievable than through a conventional IPO process.

Structural Differences from Traditional IPOs

In a traditional IPO, a company must work with underwriters to:

• Complete the financing process
• Prepare investor allocation
• Satisfy shareholder distribution requirements
• Conduct roadshows

The process is comprehensive and operationally complex. In contrast, a SPAC completes its fundraising and shareholder structure at the time of its own IPO. When a target company is identified, the target does not undergo a full traditional IPO process again.

Differences in Valuation Mechanisms

In a traditional IPO, valuation is largely determined through roadshows and institutional investor demand.

In a SPAC transaction, valuation is primarily negotiated between the SPAC and the target company, supported by a third-party fairness opinion. While SEC disclosure requirements still apply, pricing is fundamentally based on negotiation rather than solely on market-driven book building. As a result, valuations in SPAC transactions are determined through negotiation and may differ from valuations established through a traditional IPO book-building process.

Current Environment of the U.S. Capital Markets

Market Depth and Liquidity

The U.S. capital markets remain among the deepest and most liquid globally. Institutional investor participation is broad, and financing channels are mature.

Brand and International Influence

A U.S. listing can significantly enhance a company’s brand and international visibility. It may facilitate access to global investors, increase market exposure, and support business expansion. After listing, companies may conduct follow-on offerings or secondary issuances to further support growth.

Significance for Chinese Companies

For Chinese companies, a U.S. listing is often regarded as an important milestone. It reflects a certain level of corporate maturity, governance standardization, and integration with international capital markets.

Continued Activity of Chinese Issuers and the Role of SPACs

Chinese companies have long been among the most active foreign issuer groups on Nasdaq. From a broader market structure perspective, the U.S. capital markets remain an important offshore financing platform for Chinese enterprises.

Although Nasdaq’s regulatory standards continue to rise, this reflects an emphasis on listing quality and governance standards rather than market closure. In this context, SPAC transactions have in recent years become an important listing pathway for certain Chinese companies, offering additional structural options during specific market cycles.

For companies with clear ownership structures, adequate disclosure, and compliant audit practices, listing on Nasdaq remains practically feasible.

Final Takeaways

Overall, the U.S. capital markets are entering a phase that places greater emphasis on quality and governance. Adjustments to Nasdaq listing standards do not necessarily signal reduced opportunity, but rather higher expectations regarding corporate structure, transparency, and continuous compliance capability.

For companies with clear shareholding structures, mature financial systems, and international strategic positioning, Nasdaq remains one of the most influential and deepest capital platforms globally.

With traditional IPO and SPAC pathways coexisting, companies that plan early, strengthen governance, and prepare thoroughly for compliance continue to have meaningful opportunities to achieve listing in the U.S. capital markets and pursue long-term development.

If you would like to discuss Nasdaq listing pathways, recent regulatory developments, or whether a traditional IPO or SPAC transaction may be appropriate for your company, our team is available to assist.

Contact Person: Nick L. Torres, Esq. and Zhiqi Zheng, Esq.