Small-Cap Problems Dim a Bright Year for Nasdaq IPOs

Small-cap listings will face tougher scrutiny and new rules from regulators and exchanges amid growing concerns from investors and the media. (Spencer Platt/Getty Images)

Key Points

• Nasdaq led US IPOs in 2025, but a third of its 290 IPOs were small deals, mostly from China, with half falling over 72%.
• Regulators are investigating small-capitalization IPOs on Nasdaq due to concerns over potential pump-and-dump frauds.
• Nasdaq’s new rules, approved this month, give it more discretion to refuse listings and establish a $15 million minimum for all IPOs.

In a stock market eager for initial public offerings, Nasdaq says that it once more led the U.S. in IPOs this year. New deals like CoreWeave , Medline, and SailPoint joined the exchange’s established tech names to lift the Nasdaq Composite Index 22%, with just a few trading days left in 2025.

But Nasdaq’s IPO laurels were blighted by a swarm of tiny offerings that left investors with steep losses and prompted investigations by regulators concerned over potential pump-and-dump frauds.

As Barron’s reported, a third of the 290 IPOs on Nasdaq this year were deals that raised less than $25 million, mostly for businesses based in China. Half of those tiny deals have fallen by more than 71% since their debuts, and the U.S. Securities and Exchange Commission recently halted trading in a dozen Nasdaq stocks shortly after their IPOs, based on what it said was evidence of potential manipulation.

Nasdaq declined to comment when we asked about its small-capitalization IPOs. So did the New York Stock Exchange, which listed 20 offerings below $25 million this year, compared with Nasdaq’s 110.

Nasdaq has long said it is legally obligated to provide fair access to companies that meet its listing standards, and must promote capital formation for even the smallest companies. Early this month, SEC Chair Paul Atkins and Nasdaq CEO Adena Friedman said in a fireside chat that they want to “make IPOs great again,” including by easing disclosure requirements for small issuers.

Meanwhile, a cross-border SEC task force and the brokerage industry self-regulator Finra are each probing the issuers and underwriters of the year’s problematic small stocks. Wall Street groups like the trade association Sifma told regulators that Nasdaq was too lenient and slow to change its listing rules.

In the spring, Nasdaq raised the minimum offering size to $15 million, for most deals. Issuers quickly exploited a loophole in the new rule, however, and the number of sub-$15 million IPOs on Nasdaq in 2025 surged past the total for 2024. This month, the SEC approved two more revisions to Nasdaq’s IPO rules: giving the exchange more discretion to refuse a listing, based on the backgrounds of company insiders or the underwriter; and establishing the $15 million threshold for all IPOs.

Nasdaq will have a harder time running up its IPO count next year, under the listing rules it adopted this month. But those changes won’t significantly reduce the capital it raises for American businesses.

The tiny deals shunned by Nasdaq’s new rules accounted for a third of its 2025 listings, but altogether they raised only $650 million—mostly for China-based issuers. That’s 1.5% of the $44.6 billion raised by all Nasdaq IPOs this year.

Write to Bill Alpert at william.alpert@barrons.com and Nate Wolf at nate.wolf@barrons.com