What Is "Listed"?
A listed company issues shares of its stock for trading on a stock exchange. If a company is listed in the U.S., it has met the requirements of the Securities and Exchange Commission (SEC) for selling shares to the public and has been accepted for trading on an exchange such as the New York Stock Exchange. It is a public company.
Companies that are listed are required to submit quarterly financial statements to the SEC and to their shareholders.
- A listed company issues stock shares to the public through a stock exchange.
- Once issued, the company's outstanding shares are bought and sold through the exchange.
- Listed companies must follow the rules of the exchange and the regulations of the Securities and Exchange Commission (SEC).
- A company may be delisted because it fails to meet the exchange requirements or because the company is being bought out by another company or by private investors.
- A company that does not meet the standards of an exchange may offer stock shares to the public through the over-the-counter market.
Understanding the Term Listed
A listed company is a public company. It has issued shares of its stock through an exchange, with each share representing a sliver of ownership of the company. Those shares can then be bought and sold by investors, rising or falling in value according to demand.
A company must apply to an exchange to be listed. Each exchange sets its own requirements, which typically include minimum levels of cash flow and company assets. The company also must adhere to the exchange's standards of corporate governance.
Since they are public companies, all listed companies are subject to regulation by the Securities and Exchange Commission. Among other things, this means that the company must publish quarterly and annual financial reports.
In order to be listed, a company must meet the qualifications set by one of the stock exchanges. Once a company is listed, it must continue to meet those qualifications or risk being delisted.
Benefits of Being Listed
Companies list on an exchange in order to raise cash. The sale of stock on the open market is one way to raise a great deal of money fast.
In general, companies that want to grow and expand have a few ways to raise the money:
- They can borrow the money and pay interest on it.
- They can seek private investors with deep pockets, who will expect a measure of control in return for their investment.
- They can go public and raise money through the sale of shares in the company.
Of course, individual investors also expect to exert a measure of control over companies whose stock they own. Ownership of a single share of common stock gives an investor the right to attend a company's annual meeting and vote on the issues raised there.
Listing on a stock exchange gives a company more than access to a piggy bank. It can greatly enhance the visibility of the company by drawing the attention of investors and the financial media. It also gives a company a way to reward its employees, through stock options.
There are benefits to investors as well. The requirements of the exchanges and the regulations of the SEC together offer a degree of transparency and accountability.
In their modern form, the exchanges also offer great liquidity and ease of use to stock investors.
The number of companies listed on the NYSE. The Nasdaq lists about 3,300.
Initial Public Offering (IPO)
Many ambitious young companies set "going public" as their first major goal. The process toward launching an initial public offering (IPO) is long and arduous and includes attracting early private investors, building, refining, and testing the product, and creating a business plan.
The company must prepare a package of financial statements to submit to the Securities & Exchange Commission for its approval. Then the company's founders go on the road to sell their plan to institutional investors and the financial media.
Once a company has been accepted for listing on an exchange, it can set a share price and a date for its IPO.
If the IPO is successful, the company gets a big wad of cash to invest in its expansion and to reward its founders and early investors.
Once the company is established it can issue new rounds of stock shares from time to time. This is usually done to raise money for a specific project. It can't be done too often, though, without objections from existing shareholders who don't want the value of their shares diluted.
Listed vs. Unlisted Companies
Some of the biggest brands in America are produced by companies that are privately owned rather than publicly listed.
Some companies bounce back and forth between listed and privately-owned status, typically as a result of a leveraged buyout by a private equity firm. Burger King and the Jo-Anne Stores chain are examples of companies that have been listed and unlisted.
Some very large companies have never been listed. The largest privately-owned companies in America include Cargill, Koch Industries, and the Publix supermarket chain.
Requirements to be Listed on the Nasdaq Exchange
The Nasdaq is a global online stock exchange known for listing some of America's largest technology companies.
A company can qualify for listing on the Nasdaq if it meets the requirements outlined in its 19-page "Initial Listing Guide." Those requirements include:
- The company must have a minimum of 1,000,000 publicly traded shares upon listing, excluding those held by officers, directors, or any beneficial owners of more than 10% of the company.
- The regular bid price at the time of listing must be at least $4, and there must be at least three market makers for the stock. Alternatively, the company may qualify if it has a closing price of $3 or $2, depending on other requirements.
- The company must abide by Nasdaq corporate governance rules.
- Companies must have a market value of publicly held stock of $15,000,000 (or $5,000,000 if using the net income standard).
The Nasdaq also requires companies to meet all of the criteria under at least one of the following standards:
- Earnings standard: The company must have aggregate pre-tax earnings in the prior three years of at least $10 million, in the prior two years of at least $2 million, and no single year in the prior three years can have a net loss.
- Capitalization with cash flow: The company must have a minimum aggregate cash flow of at least $27.5 million for the past three fiscal years with no negative cash flow in any of those three years. In addition, the company's average market capitalization over the prior 12 months must be at least $550 million, and revenues in the previous fiscal year must be a minimum of $110 million.
- Capitalization with revenue: Companies can be removed from the cash flow requirement of the second standard if their average market capitalization over the past 12 months is at least $850 million and revenues over the prior fiscal year are at least $90 million.
- Assets with equity: Companies can eliminate the cash flow and revenue requirements, and decrease their marketing capitalization requirements to $160 million if their assets total at least $80 million and their stockholders' equity is at least $55 million.
Requirements to be Listed on the New York Stock Exchange (NYSE)
The New York Stock Exchange is the world's largest stock exchange and the oldest in America, having been founded in 1792.
The NYSE requires applicants to meet any one of several financial standards. It must meet a set minimum for pre-tax income, global market capitalization, shareholders' equity, or market value of outstanding shares.
It also has what it calls distribution standards, with minimums set for share price and trading volume, among other factors.
Questions & Answers
Is a Listed Company a Public Company?
All listed companies are public companies by definition. That is, they are permitted to list shares of their stock for trading to the public on one of the exchanges. They have met the standards of the exchange and are regulated as public companies by the SEC.
Can a Company Be Delisted?
When a company is delisted, it could be good news or bad news for investors.
A company can be delisted because it no longer meets the standards of the stock exchange that lists it. That usually means that the company is failing and its stock has dropped below $1 or so a share.
These companies often are headed for bankruptcy. Their outstanding issues may trade as penny stocks in the over-the-counter market but more often are worthless.
A notorious current example is Sears Holding Corporation, owner of the moribund Sears and KMart department store chains. Delisted from the Nasdaq in 2018, it is now sold over-the-counter under the symbol SHLDQ. As of March 11, 2022, its share price was 0.0190 and it had a market capitalization of $3.07 million.
A company also can be delisted when a private equity firm or other buyer buys up its shares for a merger, a takeover, or a private equity buyout. In some cases, the goal may be to revamp the company and then go public again.
For example, Dell Computers went public in 1988 and then delisted in 2013, when its founder Michael Dell and his partners acquired a controlling interest and paid off its remaining shareholders. Dell (DELL) returned to public trading in August 2016.
What Is an Unquoted Public Company?
An unquoted public company is an unlisted company. It may trade over-the-counter or it may have ceased trading altogether.
Unquoted public companies do not qualify for an exchange listing or have been delisted from an exchange.
Unquoted public companies are less heavily regulated than listed companies but more regulated than private companies.