What it means
Nasdaq divides the companies it lists into three tiers, each with its own entry standards. The Capital Market is the entry level for smaller or newer companies, the Global Market sits in the middle, and the Global Select Market is the top tier with the highest requirements.
The Global Market was previously known as the Nasdaq National Market before the tiers were reorganised in 2006. To list on the Global Market, a company has to meet one of several alternative sets of standards.
These generally cover measures such as profitability, equity, market value, revenue and the number of shareholders who hold at least a round lot (usually 100 shares), together with a minimum share price. Companies must also meet governance rules covering independent directors, audit committees and disclosure.
For investors, the tier tells you something about the stage and size of the company, but it is not a quality guarantee. A company on the Global Market has passed certain screens, yet it can still make losses or fall in value, and companies can move between tiers as they grow or shrink.
For the company itself, listing brings benefits and costs. It gains access to a broad investor base, easier fundraising through share issues and a visible market price, but it must also pay listing fees, produce regular public reports and comply with securities laws.
Management time spent on investor relations and compliance is a real cost. If a listed company stops meeting the standards, for example because its share price stays low or its equity falls, Nasdaq can issue a deficiency notice and give time to fix the problem.
The company may move to a lower tier or be delisted if it cannot comply. Investors who want to check a company's tier can find it on the exchange's website or in the company's annual report.
The tier is shown alongside the ticker symbol, and any change of tier is announced to the market, so it is easy to track over time.
In practice
Real-world examples.
Example
A medical software company has grown to $90,000,000 in annual revenue and wants wider investor access. After meeting the financial and shareholder tests, it lists on the Nasdaq Global Market and raises $60,000,000 in an offering.
Example
A regional bank holding company listed on the Nasdaq Capital Market has grown steadily for a decade. It applies to transfer up to the Global Market, which its board expects to improve trading volume and visibility with institutional investors.
Example
An investor screening for mid-sized technology firms filters a database by listing tier. She uses the Global Market tag as one of several starting points, then reads each company's accounts to check profitability and debt.
Case study
Seen in the real world.
Northbeam Analytics is a fictional data company that listed on the Nasdaq Capital Market with a market value of around $80,000,000. After four years of growth, its revenues rose and its shareholder base widened. The chief financial officer asked the board to consider moving up to the Global Market.
The finance team compared the company's numbers with the Global Market standards, checked the share price history and estimated the extra cost of compliance and fees. The move cost around $75,000 in fees and advisers, and management expected it to improve visibility with fund managers. The board also asked for a short note on what would happen if the company later fell short of the standards, so that directors understood the downside as well as the upside.
In this illustrative story, after the transfer, trading volume rose and analyst coverage increased from two firms to five. The chief financial officer cautioned that the tier alone did not cause the improvement, since the company had also improved its profits and investor communications in the same period. The board agreed to review the position again after a year, comparing trading volume, analyst coverage and the cost of the listing, so that the decision would be judged on evidence.
Watch out
Common mistakes.
- Assuming a Global Market listing means the company is safe. The tier shows that listing standards were met at some point, not that the company is financially sound today.
- Confusing Nasdaq tiers with different exchanges. All three tiers are part of the same exchange and use the same trading system.
- Treating tier moves as permanent. Companies can move up or down depending on whether they meet the standards.
Questions
People also ask.
What does NQGM stand for?
It stands for the Nasdaq Global Market.
How is it different from the Global Select Market?
The Global Select Market has higher financial, liquidity and governance standards, and is considered the premium tier.
Do investors trade shares differently across tiers?
No, the trading mechanics are the same; only the listing standards differ.
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