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On May 14, 2026, the U.S. Securities and Exchange Commission (the “SEC”) approved Nasdaq’s proposed rule change to its initial listing standards, which establishes heightened initial listing requirements for certain China-based companies seeking to list on Nasdaq.
Under the new rule, China-based companies pursuing a Nasdaq initial public offering (“IPO”) generally must raise at least $25 million in gross proceeds through a firm commitment underwritten offering. The rule is expected to become effective in mid-June 2026 following a 30-day implementation period.
This blog summarizes the key requirements of the new rule and its implications for companies considering a Nasdaq listing.
Background: Why Nasdaq Adopted the New Rule
According to Nasdaq and the SEC, the rule was adopted in response to concerns regarding market manipulation and regulatory risks associated with certain China-based issuers.
In approving the rule, the SEC noted that a significant portion of Nasdaq’s enforcement referrals relating to market manipulation involved China-based companies. Nasdaq also expressed concerns regarding smaller offering sizes, lower public float levels, concentrated investor bases, and challenges associated with enforcement and regulatory oversight.
The SEC concluded that the proposed rule change was consistent with investor protection objectives and the maintenance of fair and orderly markets.
Which Companies Are Covered?
The rule applies to companies that are headquartered, incorporated, or principally administered in mainland China, Hong Kong, or Macau.
Nasdaq may also apply the rule to companies incorporated outside China based on a multi-factor analysis. Factors Nasdaq may consider include:
- The location of the company’s books and records
- Whether at least 50% of assets or revenues are located in or derived from China
- Whether at least 50% of directors, officers, or employees are located in, resident in, or citizens of China
- Whether the company is controlled by persons whose business is principally administered in China
As a result, certain offshore holding companies, including companies incorporated in jurisdictions such as the Cayman Islands or British Virgin Islands, may still be treated as China-based companies depending on their operations and management structure.
Key Listing Requirements Under the New Rule 5210(l)
Initial Public Offerings
A China-based company seeking to list through an IPO must complete a firm commitment underwritten offering that generates at least $25 million in gross proceeds to public investors.
Business Combinations
For China-based companies listing through a business combination, including a de-SPAC transaction, the combined company must satisfy Nasdaq’s $25 million minimum market value of unrestricted publicly held shares requirement, in addition to all other applicable initial listing standards.
Direct Listing
China-based companies may not pursue direct listings on the Nasdaq Global Market or Nasdaq Capital Market. Direct listings remain available only on the Nasdaq Global Select Market, which is subject to separate and generally more stringent listing standards.
Transfer from OTC Markets or Other Exchanges
A China-based company seeking to transfer its listing to Nasdaq must satisfy a one-year trading history requirement and meet the applicable $25 million market value of unrestricted publicly held shares threshold, along with Nasdaq’s other initial listing standards.
Practical Considerations
The new rule may have a significant impact on smaller China-based companies that historically relied on relatively small U.S. IPOs to access public markets and provide liquidity to investors.
Companies that cannot satisfy the $25 million threshold may need to evaluate alternative financing or listing strategies. At the same time, the rule may increase the importance of IPO planning, offering size analysis, and early assessment of Nasdaq eligibility.
The rule also arrives amid broader regulatory scrutiny of China-based issuers, including SEC enforcement initiatives, Congressional oversight activities, and increased securities litigation involving certain China-based public companies.
Key Takeaway
Nasdaq Rule 5210(l) establishes a new framework for China-based companies seeking to access U.S. public markets. The rule introduces a minimum $25 million IPO proceeds requirement, imposes restrictions on certain direct listings, and establishes additional requirements for business combinations and exchange transfers.
Companies with operations or management connections to China, Hong Kong, or Macau should evaluate whether the rule applies to their proposed transaction and assess its impact on listing plans well in advance of the anticipated effective date.
If you would like to discuss Nasdaq Rule 5210(l), U.S. listing strategies, or the implications of the new requirements for China-based issuers, our team would be happy to assist.
Contact Person: Nick L. Torres, Esq. and Zhiqi Zheng, Esq.
Written By Weiwei Lu
Weiwei Lu specializes in securities law and corporate matters, and general public company work. She leverages her bilingual proficiency in English and Mandarin and her deep understanding of cross-border business and cultural environments to help Chinese companies navigate the complex and rapidly evolving U.S. legal and regulatory landscape. With strong cross-cultural communication skills, she supports clients in facilitating efficient transactions and achieving their business goals.
