Nasdaq has been granted greater discretion to reject IPO applications that raise concerns about manipulation.
TL;DR
Nasdaq now has more power to reject IPO applications that risk manipulation, as approved by the SEC. The rule targets issues like non-cooperation with regulators or questionable transactions to address post-listing price drops.
On December 13, Reuters reported that Nasdaq has been granted greater discretion to reject IPO applications that pose a risk of manipulation. This new rule was immediately approved and took effect on Friday by the U.S. Securities and Exchange Commission (SEC).
The new rules authorize Nasdaq to reject a company's listing if: the company's place of business does not cooperate with U.S. regulatory scrutiny; the underwriters, brokers, lawyers, or auditors have been involved in questionable transactions; or there are doubts about the integrity of management or major shareholders. This move aims to address the problem of numerous small IPOs experiencing sharp price drops after listing in recent years. In the past year, half of Nasdaq IPOs raised less than $15 million, and most of these saw their share prices fall by more than 35% within a year.