Getting listed on the New York Stock Exchange isn't something that happens accidentally. To be listed on any exchange, a company has to meet a set of stringent standards. After it makes it to the big board, the stock has to keep meeting minimum requirements or it will end up delisted -- dropped from the exchange.
Tiny firms don't make the cut on the big board. To get a listing on the NYSE, a corporation needs at least 400 round-lot holders, or stockholders with 100 shares apiece. The company must have at least 1.1 million outstanding shares worth $40 million or more, and a price-per-share can be no lower than $4. If the company's making an initial public offering, the NYSE will accept a guarantee from the IPO underwriter that the IPO will meet the board's standards.
The NYSE will accept a stock if it meets one of several tests: earnings, valuation with cash flow or pure valuation. The earnings test requires a minimum $10 million total earnings for the previous three years. Valuation with cash flow requires capitalization -- the value of the outstanding stock -- of $500 million and an aggregate $25 million cash flow for the past three years. Pure valuation requires a $750 capitalization and revenue of $75 million in the most recent fiscal year. An affiliate of an established NYSE listing only needs $500 million in capitalization and a year in existence as a company.
Delisting Distribution Criteria
The NYSE's manual says the amount of stock in circulation is one criteria it uses for delisting. The board managers will consider prompt delisting if the number of stockholders falls below 400, or below 1,200 when monthly trading volume is under 100,000 shares. If there are less than 600,000 publicly held shares, that would be another nail in the coffin. Shares held by corporate directors, their families or by stockholders with 10 percent or more of the total shares outstanding do not count toward the 600,000 standard.
Delisting by Numbers
A company that falls short of the NYSE's financial criteria gets delisted, too. For example, capitalization of less than $15 million over a 30-day trading period is grounds for delisting. The board will drop a company that qualifies under the earnings test if its capitalization is less than $50 million over a 30-day period. Companies that qualify for listings under the NYSE's other tests have their own capitalization minimums to meet. A company can also be delisted if its share price falls below $1 for 30 consecutive trading days.
A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.