Requirements for an Initial Public Offering in Mexico vs. the U.S

Listing your company on a Stock Exchange is an important decision where many factors come into play. This week we analyzed the main regulatory differences to list a company on the two main stock exchanges in the US (NASDAQ and NYSE) and the two stock exchanges in Mexico (BMV and BIVA). We would like to start off by giving some facts about these exchanges. There are currently 158 (including REITs) companies listed on the BMV, 74 on BIVA, 7,429 on the NYSE and more than 3,000 companies on NASDAQ. There were no Initial Public Offerings in Mexico during 2021, whereas in the American Market, there were 273 IPOs in the NYSE and 753 in the NASDAQ.

Here is a summary of the different requirements needed in order to successfully list a company on each stock exchange.

NASDAQ

There are 3 different markets where you can list a company in this exchange: NASDAQ Global Select Market (with the toughest requirements), NASDAQ Global Market, and NASDAQ Capital Market. Click here to see the full list of requirements.

NASDAQ Global Select Market

Liquidity Requirements (must meet all of the following standards):

• 450 Unrestricted Round Lot Shareholders¹ or 2,200 Total Shareholders.
• 1,250,000 Unrestricted Publicly Held Shares.
• Market Value of Unrestricted Publicly Held Shares of $45 million.

¹ According to NASDAQ, a Round Lot Shareholder is any holder that owns 100 or more unrestricted securities.

Financial Requirements (must meet one of the following standards):

• Earnings: Aggregate Pre-Tax Earnings >$11 million in the last 3 years (each of the previous 3 fiscal years >$0 and each of the 2 most recent fiscal years >$2.2 million), $4 Bid Price (per share).
• Capitalization with Cash Flow: Aggregate Cash Flows >$27.5 million in the previous 3 fiscal years and each of the previous 3 fiscal years >$0. Average Market Capitalization of >$550 million over previous 12 months. Revenue of >$110 million in the previous fiscal year and $4 Bid Price (per share).
• Capitalization with Revenue: Average Market Capitalization of >$850 million over previous 12 months, Revenue of >$90 million in the previous fiscal year and $4 Bid Price (per share).
• Assets with Equity: Market Capitalization of $160 million, $80 million of Total Assets, $55 million in Stockholders’ Equity, $4 Bid Price (per share).

NASDAQ Select Market

Must meet one of the following standards:

• Income Standard: Pre-Tax Earnings of $1 million in the most recent fiscal year or in 2 of the last 3 fiscal years, $15 million in Stockholders’ Equity, 1.1 million Unrestricted Publicly Held Shares, Market Value of Unrestricted Publicly Held Shares of $8 million, $4 Bid Price (per share), 400 Unrestricted Round Lot Shareholders, 3 Market Makers.
• Equity Standard: $30 million in Stockholders’ Equity, 1.1 million Unrestricted Publicly Held Shares, Market Value of Unrestricted Publicly Held Shares of $18 million, $4 Bid Price (per share), 400 Unrestricted Round Lot Shareholders, 3 Market Makers, 2 years of Operating History.
• Market Value Standard: Market Value of Listed Securities of $75 million, 1.1 million Unrestricted Publicly Held Shares, Market Value of Unrestricted Publicly Held Shares of $20 million, $4 Bid Price (per share), 400 Unrestricted Round Lot Shareholders, 4 Market Makers.
• Total Assets / Total Revenue Standard: $75 million in Total Assets and $75 million in Total Revenue (in the most recent fiscal years or in 2 of the last 3 fiscal years), 1.1 million Unrestricted Publicly Held Shares, Market Value of Unrestricted Publicly Held Shares of $20 million, $4 Bid Price (per share), 400 Unrestricted Round Lot Shareholders, 4 Market Makers.

NASDAQ Capital Market

Must meet one of the following standards:

• Equity Standard: Stockholders’ Equity of $5 million, Market Value of Unrestricted Publicly Held Shares of $15 million, 2 years of operating history, 1 million Unrestricted Publicly Held Shares, 300 Unrestricted Round Lot Shareholders, 3 Market Makers, $4 Bid Price or $3 Closing Price (per share).
• Market Value of Listed Securities Standard: Stockholders’ Equity of $4 million, Market Value of Unrestricted Publicly Held Shares of $15 million, Market Value of Listed Securities of $50 million, 1 million Unrestricted Publicly Held Shares, 300 Unrestricted Round Lot Shareholders, 3 Market Makers, $4 Bid Price or $2 Closing Price (per share).
• Net Income Standard: Stockholders’ Equity of $4 million, Market Value of Unrestricted Publicly Held Shares of $5 million, Net Income from Continuing Operations for $750,000 (in the latest fiscal year or in two of the last three fiscal years), 1 million Unrestricted Publicly Held Shares, 300 Unrestricted Round Lot Shareholders, 3 Market Makers, $4 Bid Price or $3 Closing Price (per share).

NEW YORK STOCK EXCHANGE

There are 2 main markets in this stock exchange: NYSE (Large-Mid Caps) and NYSE American (Small Caps).

NYSE (requirements for Non-US Companies):

• 5,000 round-lot shareholders worldwide
• 2.5 million shares publicly held
• Market value of publicly held shares for $100 million worldwide (or $60 million for Affiliates)
• Minimum public offering price per share: $4

Additionally, meet one of the following:

• Earnings Test: Pre-Tax Earnings of $100 million in the last 3 years (with a minimum of $25 million in each of the 2 most recent years).
• Valuation / Revenue (with Cash Flow Test): i) Global Market Cap of >$500 million, ii) >$100 million in revenues LTM, iii) >$100 million in aggregate cash flows in the last 3 years (with a minimum of $25 million in the 2 most recent years).
• Pure Valuation Revenue Test: Global Market Cap of >$750 million and >$75 million in revenues during the last fiscal year.
• Affiliated Company Test: Global Market Cap of >$500 million and more than 12 months of operating history. The parent company must be listed and in ‘good standings’, retaining control of the entity or is under common control with the entity.

Click here to see the full list of requirements.

NYSE American

Must meet one of the following:

• Standard 1: Stockholders’ Equity of at least $4 million, Pre-tax income from continuing operations of at least $750,000 (in the most recent fiscal year or in two of the last three fiscal years).
• Standard 2: 2 years of operating history, Stockholders’ Equity of at least $4 million, Aggregate Market Value of Publicly Held Shares of $15 million.
• Standard 3: Stockholders’ Equity of at least $4 million, Total Value of Market Capitalization of $50 million, Aggregate Market Value of Publicly Held Shares of $15 million.
• Standard 4: Total Value of Market Capitalization of $75 million or $75 million in Total Assets and Total Revenue (each) in the most recent fiscal year, or in 2 of the last 3 fiscal years. Aggregate Market Value of Publicly Held Shares of $20 million.

Additionally, all standards must meet the Distribution and Stock Price/Market Value of Shares Publicly Held Requirements:

• Distribution: Public distribution of >500k shares and >800 Public Shareholders’, or Public Distribution of >1 million shares and >400 public shareholders.
• Stock Price / Market Value of Shares Publicly Held: For Standard 1, minimum market price of $3 per share and $3 million Aggregate Market Value of Publicly Held Shares. For Standards 2 and 4, minimum market price of $3 per share. For Standard 3, a minimum market price of $2 per share.

Click here to see the full list of requirements.

MEXICAN STOCK EXCHANGE (BMV)

• Operating History of the last 3 years.
• Stockholders’ Equity of 20 million UDIs (Unidades de Inversión² in Spanish).
• Average Income for the last 3 years must be positive.
• Securities subject to the IPO: 15% of paid Capital Stock
• Number of Shares subject to the IPO: 10 million shares
• Number of Shareholders: 200
• The price per share may not be below 1 UDI per share.
• Audited Financial Statements by an external auditor for the last 3 fiscal years.

² Unidades de Inversión (UDI) 1 = $7.3301 MXN (as of May 2022)

Click here to see the full list of requirements.

BIVA (BOLSA INSTITUCIONAL DE VALORES)

• Operating History of at least 3 years.
• Must follow IFRS, except financial institutions.
• Mandatory Corporate Governance.
• At least 15% of the Capital Stock must be subject to the IPO, or at least 950 million UDIs in national currency.
• >10 million securities subject to the IPO, with a minimum price per share of 1 UDI.
• >100 shareholders post-IPO.
• Distribution Criteria: >50% of total amount of the offering must be placed among people acquiring <5% of the Public Offer.

Click here to see the full list of requirements.

If you would like to know any additional information regarding regulations and the requirements to be listed in these or any other stock exchanges, don’t hesitate to reach out to us! In Miranda IR, we will be more than happy to help you choose the best option for your company, as well as helping you prepare the required documents and materials.

Sources

• https://www.bmv.com.mx/en
• https://biva.mx/?gclid=EAIaIQobChMIl-yt6pHd9wIVkB-tBh0LLwc-EAAYASAAEgJt2PD_BwE
• https://www.nasdaq.com/
• https://www.nasdaq.com/articles/a-record-year-for-ipos-in-2021
• https://www.nyse.com/index
• https://listingcenter.nasdaq.com/ViewPDF.aspx?Material_Search.aspx?mcd=lq&cid=34&years=2017,2016,2015,2017,2016,2015,2014,2013,2012,2011,2010,2009,2008,2007,2006,2005,2004,2003,2002&sub_cid=&searchkeywords=&exactsearchddvalue=1&Print=N&materials=0&popularfl=#:~:text=A%20round%20lot%20holder%20is,100%20or%20more%20unrestricted%20securities