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What Is a NASDAQ IPO?

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  • Written By: Geri Terzo
  • Edited By: PJP Schroeder
  • Last Modified Date: 27 September 2016
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Companies that list shares in the public markets for the public to trade often do so on a formal, major exchange. The debut issuance of a company's equity to the public is known as an initial public offering (IPO). A Nasdaq IPO is one in which a company opts to list its shares on the electronic exchange known as Nasdaq. Certain qualifications must be met and fees paid in order for a company or mutual fund to list its equity shares on a major exchange, including the Nasdaq.

The Nasdaq is one of the largest stock exchanges in the U.S. It is an electronic exchange, so there are no live traders facilitating buy and sell orders on behalf of investors. Trades are facilitated electronically to ensure that investors receive the best possible price for an investment and that orders are executed quickly.

In addition to the U.S., the Nasdaq also has a presence across Europe and the Middle East. The Nasdaq index is a market barometer that represents trading in certain stocks. A Nasdaq IPO is not likely to be included in the index right away because the market barometer is made up of the largest domestic and international stocks that trade on the exchange.

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Deciding to debut a Nasdaq IPO means that certain listing requirements must be met. Listing fees are determined based on the value of a new issue, and annual fees may apply. If a company does not meet all of the conditions, it may be able to list its shares by meeting some of those demands.

Profitability over a certain number of years might need to exist to meet a certain Nasdaq standard. Revenues, or sales, might also need to surpass a certain threshold in order to qualify. A company's total assets may need to be worth a minimum amount to qualify for one of the standards. The stock price at which a company intends to list its shares must also be valued at a minimum price, depending on the standard sought.

Technology companies may launch a Nasdaq IPO instead of listing shares on another major exchange. Many of the stocks that make up the Nasdaq index are in fact technology companies, and the exchange has historically attracted leading technology names, including Google. A technology Nasdaq IPO may be listed on this electronic exchange as companies flock to the platform on which industry competitors similarly list their shares.

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