due_logo
Search
Close this search box.

Table of Contents

Nasdaq Capital Market



Definition

The Nasdaq Capital Market, formerly known as the Nasdaq SmallCap Market, is a stock market exchange tailored for small to mid-sized businesses that wish to raise capital. It is a subset of the larger Nasdaq Stock Market and has less stringent listing requirements compared to the Nasdaq Global Market. This enables smaller companies to access investors and grow while adhering to a regulatory framework.

Phonetic

The phonetics of the keyword “Nasdaq Capital Market” are:Nasdaq: [ˈnæzˌdæk]Capital: [ˈkæpɪtəl]Market: [ˈmɑrkɪt]

Key Takeaways

  1. Designed for Small and Medium-Growth Companies: The Nasdaq Capital Market is a stock market platform primarily catering to small and medium-sized growth companies, allowing them to raise capital through the public market efficiently and cost-effectively.
  2. Listing Requirements: Companies listed on the Nasdaq Capital Market must meet specific financial, liquidity, and corporate governance requirements. These requirements are generally less stringent than those for larger companies listed on the Nasdaq Global Select or Global Market tiers, making it more accessible for emerging companies.
  3. Visibility and Credibility: Being listed on the Nasdaq Capital Market provides companies with increased visibility, credibility, and access to a broader investment community. This helps growing businesses attract more institutional investors and broadens their shareholder base as they work towards achieving long-term growth and success.

Importance

The Nasdaq Capital Market is important because it provides an accessible listing platform for early-stage, small, and medium-sized companies to raise capital, gain visibility, and build credibility. As a key component of the broader Nasdaq Stock Market, the Nasdaq Capital Market focuses on growth-oriented companies and innovative industries, offering them a streamlined listing process with flexible listing standards. This attracts investors, analysts, and financial media, creating a robust trading environment and fostering investment opportunities. Overall, the Nasdaq Capital Market plays a crucial role in supporting economic growth and entrepreneurial ventures across various sectors.

Explanation

The Nasdaq Capital Market serves as an essential platform for emerging and smaller companies in the business and finance world to access capital and grow their business ventures. As a tier within the Nasdaq stock market, it primarily focuses on facilitating the trade and listing of early-stage, growth-oriented companies, breakthrough startups, as well as more established businesses seeking to raise initial or additional funds to expand their operations or innovate further. By providing a more streamlined listing process for companies with lower market capitalizations, it allows for the entry of those smaller businesses in the competitive market environment and helps fuel the growth of the economy through the nurturing of innovative and agile enterprises. In addition to providing a comprehensive platform for raising capital, the Nasdaq Capital Market also offers a variety of essential supporting services that cater to the unique requirements of companies within this tier. These services include access to a sizeable network of leading industry professionals for financial advisory services and investment banking options, regulatory support to ensure compliance with financial transparency requirements, and investor relations tools which help the listed companies to effectively communicate with their investors and attract potential new ones. By allowing for increased visibility and credibility among investors, the Nasdaq Capital Market serves as a key milestone and accelerator for emerging companies looking to establish a strong foothold in their respective industries and generate long-term growth.

Examples

The NASDAQ Capital Market is a U.S. stock exchange designed for small to mid-sized companies with lower levels of market capitalization, providing an opportunity for growth and exposure in the financial market. Here are three real-world examples of companies and situations involving the NASDAQ Capital Market: 1. Beyond Air Inc. (NASDAQ: XAIR): Beyond Air, a clinical-stage medical device company, is focused on developing inhaled Nitric Oxide (NO) for the treatment of patients with respiratory conditions, including severe lung infections and pulmonary hypertension. The company was listed on the NASDAQ Capital Market on May 29, 2019, under the symbol “XAIR”. This listing raised the company’s financial visibility and provided them with access to a broader group of investors. 2. Interlink Electronics (NASDAQ: LINK): Interlink Electronics is a technology company that specializes in manufacturing sensors used in various applications such as IoT, automotive, and even the medical field. They began trading on the NASDAQ Capital Market in 1999. By listing on the NASDAQ Capital Market, Interlink Electronics gained access to a larger pool of investors, which helped the company raise capital, expand its business operations, and achieve greater recognition in the tech industry. 3. Reverse Merger – NASDAQ Capital Market Listing: A recent example of a reverse merger that resulted in the newly formed company being listed on the NASDAQ Capital Market is VectoIQ Acquisition Corp., a special purpose acquisition company (SPAC), and Nikola Motor Company, an electric and hydrogen-powered truck developer. In June 2020, VectoIQ completed its business combination with Nikola, and the combined company began trading on the NASDAQ Capital Market under the ticker symbol “NKLA”. This reverse merger allowed Nikola Motors to become publicly traded, access public market capital, and increase its a market presence without going through the traditional IPO process.

Frequently Asked Questions(FAQ)

What is the Nasdaq Capital Market?
The Nasdaq Capital Market is a tier of the Nasdaq stock exchange, created to provide a listing platform for small to medium-sized businesses with relatively lower levels of market capitalization. It offers these companies the opportunity to raise capital through equity offerings in a cost-effective and convenient manner.
How is the Nasdaq Capital Market different from other Nasdaq tiers?
The Nasdaq stock exchange has three tiers: the Nasdaq Global Select Market, the Nasdaq Global Market, and the Nasdaq Capital Market. The Nasdaq Capital Market focuses on smaller companies with lower market capitalization compared to the other two tiers, which cater to larger companies with higher market capitalization and stricter listing requirements.
What are the listing requirements for the Nasdaq Capital Market?
The Nasdaq Capital Market has specific listing requirements for companies seeking to join, which include criteria related to financial stability, liquidity, corporate governance, and reporting standards. Some of the requirements include a minimum of $4 million in stockholders’ equity or $5 million in market value of listed securities, a minimum of 300 round-lot stockholders, and a minimum bid price of $4 per share.
What are the benefits of listing on the Nasdaq Capital Market?
Listing on the Nasdaq Capital Market offers several benefits for small and medium-sized companies, such as increased visibility, access to capital, improved credibility, and the ability to attract a more diverse investor base. Additionally, the Nasdaq Capital Market has lower listing fees and requirements compared to other Nasdaq tiers, making it more accessible for smaller companies looking to raise capital.
Are there any risks associated with being listed on the Nasdaq Capital Market?
As with any investment, there are risks associated with companies listed on the Nasdaq Capital Market. Smaller companies may be more susceptible to economic fluctuations, have less access to resources, and have a higher risk of instability compared to larger, more established firms. Investors must weigh these risks against the potential benefits and should perform thorough due diligence before investing in companies listed on the Nasdaq Capital Market.
How can I invest in companies listed on the Nasdaq Capital Market?
Companies listed on the Nasdaq Capital Market can be traded through most online brokerage platforms or via full-service investment firms. Before investing, it’s essential to research and understand the company’s financials, business model, and growth potential. Keep in mind the unique risks associated with investing in smaller, less-established companies.

Related Finance Terms

  • Stock Exchange
  • Small-Cap Companies
  • Initial Public Offering (IPO)
  • Listing Requirements
  • Equity Securities

Sources for More Information


About Due

Due makes it easier to retire on your terms. We give you a realistic view on exactly where you’re at financially so when you retire you know how much money you’ll get each month. Get started today.

Due Fact-Checking Standards and Processes

To ensure we’re putting out the highest content standards, we sought out the help of certified financial experts and accredited individuals to verify our advice. We also rely on them for the most up to date information and data to make sure our in-depth research has the facts right, for today… Not yesterday. Our financial expert review board allows our readers to not only trust the information they are reading but to act on it as well. Most of our authors are CFP (Certified Financial Planners) or CRPC (Chartered Retirement Planning Counselor) certified and all have college degrees. Learn more about annuities, retirement advice and take the correct steps towards financial freedom and knowing exactly where you stand today. Learn everything about our top-notch financial expert reviews below… Learn More