Joseph Lucosky, Managing Partner of Lucosky Brookman, is at the forefront of microcap IPOs and Nasdaq/NYSE listings. In June 2023, Cboe Global Markets introduced its U.S. market, Cboe US, as a new option for micro and small-cap companies to go public. This broke the duopoly held by the NYSE and Nasdaq, offering growth companies a potentially more friendly platform for listing their securities while providing similar benefits. Nasdaq remains the overwhelming choice for micro-cap listings, but Cboe presents an interesting alternative worth exploring.
Cboe, an established player in the exchange arena, celebrated its 50th anniversary in 2023 and is a world leader in options trading. With over 650 ETFs and recent acquisitions, Cboe is now focusing on building a third senior exchange platform for public companies. This makes Cboe a viable option for micro-cap to mid-cap companies, especially in the current challenging listing and fundraising landscape. Exploring the listing requirements of Cboe and Nasdaq, the “core four” requirements including stockholders’ equity, share price, public float, and number of shareholders are essential quantitative criteria that need to be met for listing approval.
Diving deeper into the listing requirements, Cboe seems to have advantages over Nasdaq in the practical application of these criteria. For example, Cboe does not have a “burn rate” rule like Nasdaq, making it easier for issuers to meet the stockholders’ equity requirement. Cboe allows for reverse stock splits to achieve the minimum bid price concurrently with a public offering, unlike Nasdaq’s waiting period. Additionally, Cboe offers more flexibility with leak-out agreements for public float and does not have stringent requirements for round lot holders compared to Nasdaq. Anchor investors are also more welcome at Cboe, making it a potentially more attractive option for companies looking to go public.
While Cboe and Nasdaq have similar listing requirements, Cboe’s practical implementation appears to be more streamlined and issuer-friendly. This interpretation of listing requirements could be a game-changer for micro-cap companies, investment bankers, and investors in the current market environment. While Nasdaq still dominates the micro-cap market, Cboe’s issuer and deal-making friendly criteria may sway companies towards considering it as a new listing destination. Overall, Cboe seems to be moving in the right direction to provide a competitive alternative to the traditional exchanges for companies seeking to go public.
