By Clyde Noel
Town Crier Correspondent
Back to basics: Defining the big investment options
Have you ever wondered what it takes for a company stock to qualify for listing on a stock exchange?
The New York Stock Exchange is the granddaddy of exchanges. It has the most status and the stringent listing requirements.
The Nasdaq Market has more companies and the American Stock Exchange is the smallest.
The New York Stock Exchange
The New York Stock Exchange (NYSE), the largest equities marketplace in the world, is home to about 3,000 companies worth more than $17 trillion in global market capitalization.
As of year-end 2000, the NYSE had 313.9 billion shares listed and available for trading valued at approximately $12.372 trillion.
To be listed on the New York Stock Exchange, a company is expected to meet certain qualifications and to be willing to keep the investing public informed on the progress of its affairs.
To get on the “Big Board” a company must have at least 2,000 “round lot” shareholders (Investors who have at least 100 shares each).
It can also have at least 2,200 shareholders and an average monthly trading volume for the previous six months of at least 100,000 shares.
The listed NYSE company must have at least 1.1 million shares in public hands worth at least $40 million and the company must have tangible assets worth at least $40 million to ensure liquidity in the stock ready for a market of buyers and sellers.
Examples in Town Crier Index: Agilent, LSI Logic, and Hewlett-Packard.
The Nasdaq Market exchange
The Nasdaq caters to smaller companies. The National Market Listing and the SmallCap Market. (Market cap is share price times shares outstanding).
To be listed on the National Market Listing a company must have tangible assets of at least $6 million and at least 1.1 million shares in the “float.” for the public to buy and sell.
It must have pretax income of at least $1 million in the past year or in two of the past three years.
The publicly traded stock must have a market value of at least $8 million with a share price of at least $5.
There must be at least 400 round-lot shareholders who own 100 shares or more.
There must be at least three market makers for the stock which are usually security firms standing ready to buy and sell shares for their investors.
Examples in the Town Crier Index: BEA Systems, KLA Tencore and Lam Research.
Companies listed on Nasdaq’s smallcap market must have tangible assets of $4 million or market capitalization of $50 million, or a profit in the past year or two of the past three years of $750,000.
There must be three market makers and 300 round-lot shareholders.
The company must have been in operation for at least one year or have market capitalization of $50 million.
Examples in Town Crier Index: Abaxis, Brokat and 3Do.
The “pink sheets”
When companies don’t qualify for any of the other exchange levels, they end up in the “pink sheets” run by a company called the National Quotation Bureau. This is a service that is run like a used-car lot and is one step above the wrecking yard. It’s buyer beware.
Example in Town Crier Index: Covad Communications (COVD)
The American Stock Exchange
The American Stock Exchange (AMEX) lists over 700 companies and is the world’s second largest auction-marketplace.
Like the NYSE (the largest auction marketplace), the AMEX uses an agency auction market system which is designed to allow the public to meet the public as much as possible. In other words, a specialist helps maintain liquidity.
Regular listing requirements for the AMEX include pre-tax income of $750,000 in the latest fiscal year or 2 of most recent 3 years, a market value of public float of at least $3 million, a minimum price of $3, and a minimum stockholder’s equity of $4 million.
