Minimum bid price requirement

The minimum bid price requirement is a continued listing rule at Nasdaq and the NYSE that requires a company's stock to trade at $1.00 per share or more. A stock that stays below $1.00 for 30 consecutive business days receives a deficiency notice and generally has 180 calendar days to regain compliance.

How it works

Nasdaq measures the closing bid price. After 30 consecutive business days below $1.00, the company receives a notice and generally 180 calendar days to cure, which it does by closing at $1.00 or higher for at least 10 consecutive business days. Companies on the Nasdaq Capital Market (or that transfer to it) may qualify for a second 180-day period if they meet other listing standards and commit to a reverse split if needed. Nasdaq has tightened the rules in recent years, limiting extra time for companies that have already done reverse splits.

The NYSE looks at the average closing price over 30 consecutive trading days. A company below $1.00 generally has six months to cure.

The company must disclose the notice on a Form 8-K under Item 3.01, typically within four business days.

Why it matters for traders

A deficiency notice starts a clock that usually ends one of three ways: the stock recovers on its own, the company executes a reverse split, or it is delisted to the OTC markets. Reverse splits are the most common fix, and the stock often keeps falling after the split, since the underlying business problems remain. Struggling companies also tend to raise capital around the same time, adding dilution.

Example

Hypothetical Bluefin Robotics (ticker BFRB), listed on Nasdaq, closes below $1.00 from March 3 through April 11, 30 consecutive business days. On April 14 it receives a deficiency letter and files an 8-K. It has 180 calendar days, until about October 11, to close at $1.00 or more for 10 straight business days. Trading at $0.40 in September, it announces a 1-for-10 reverse split, lifting the price to about $4.00.

FAQ

What happens if a company misses the deadline?

The exchange issues a delisting determination. The company can usually appeal to a hearings panel, but the stock may be suspended and moved to the OTC markets.