Some OTC stocks are vulnerable to manipulation, and moving to NASDAQ doesn't necessarily eliminate this risk. Investors who bought in based on hype may sell off quickly, leading to price declines. The typical costs involved in uplisting from OTC to NASDAQ include:
Application fee: There is a $25,000 application fee to initiate the uplisting process.
Listing fees: The ongoing listing fees for NASDAQ range from $125,000 to $295,000.
Corporate governance changes: Companies may need to implement new corporate governance standards, such as establishing an Independent Compensation Committee, which can incur additional costs.
Financial reporting: Adapting to more stringent financial reporting requirements may require additional resources and potentially hiring new staff or consultants.
Legal and advisory fees: Companies often need to engage legal counsel and financial advisors to navigate the uplisting process, which can be a significant expense.
Potential capital raising: Some companies may need to raise additional capital to meet NASDAQ's financial requirements, such as maintaining a minimum level of shareholder equity.
Reverse stock split costs: If a company needs to increase its share price to meet NASDAQ's minimum price requirement ($4 per share), it may need to execute a reverse stock split, which involves administrative and legal costs.
Board of directors changes: Companies may need to restructure their board to meet independence requirements, potentially incurring recruitment and compensation costs.
Sarbanes-Oxley (SOX) compliance: Implementing SOX compliance measures can be a significant expense for companies uplisting to NASDAQ.
