Up-listing from an OTC to a National Exchange

OTC up-list uplist

Listing on NASDAQ or NYSE can be a ticket to new growth for many companies. However, it is difficult to meet the listing requirements for such large national exchanges. Many businesses find that they simply have no hope of premiering on such markets after their IPOs. For those companies, there are OTC markets. OTC markets are organized to provide investors and liquidity to small public companies. They cannot compete with the size of the national exchanges, nor do they try. Instead, they cater to smaller investors and smaller businesses looking to grow. They have lower listing requirements and lower investor standards.

Often times, a company will premier on OTC markets and up-list to a larger one when they are ready. There are two main reasons that companies up-list. First, they do it because they have outgrown OTC markets, and want to perpetuate further growth. These companies are often looking to expand, and increase market share. In fact, a company’s up-listing event is sometimes referred to as its second IPO. In these cases, it is common to raise capital with an underwriter or investment-banker in conjunction with the up-listing event.

The second main reason that companies up-list is simply that they qualify to do so. These companies are more passive in their up-listing, and may not contact an underwriter or investment banker. They realize that there are benefits to being listed on national exchanges other than the increased access to capital. There is a certain prestige which comes from such a listing, which opens up marketing avenues. For brokerages, there is also less liquidity risk with higher trading volumes and the ability to deposit shares into brokerages.

Up-listing tips


For some, it is tempting to up-list without paying for any consultation services. While such an approach is not destined inherently to end in failure, it is likely to be resource-intensive. It is true that listing requirements are publicly available from both NASDAQ and NYSE. Any CEO can google them, and memorize the list. However, the road to transition can be nuanced, and potholed. While many can successfully up-list without seeking help, the process can be expensive and lengthy. Such inefficiency can create undo strain in the first listed year when exchange fees can exceed $50,000. In many cases, if not most, it is advisable to pay for an experienced consultant to oversee the process.

Curating the Board of Directors

The board of directors is not easy to fill. Ideally, it should contain seasoned individuals with board experience. A few of these should have in-depth knowledge of the industry. However, not every company can have a perfect board. At the least, an up-listing company should strive to have a talented chair and one industry expert. This can help grease the wheels of the company during transition, and after. If no industry expert can serve on the board, find one to read and prepare the NASDAQ or NYSE application. Doing so can help reduce comments, increase response times, and speed the up-listing along.

Preparing for What Comes Next

Additionally, it is important to understand the requirements laid out by the exchanges for their companies. Some business owners dream of being traded on NASDAQ or NYSE and put too little thought into post-listing existence. They are then underprepared to meet reporting, meeting, and communication requirements. Those who are truly prepared to up-list have probably prepared extensively for items of corporate governance. They understand, to a tee, what is required at board meetings and annual shareholder meetings. They also understand how to meet those requirements while continuing operations successfully. Companies that fail to impress during their first year on national exchanges can lose reputation and shareholder trust.

If you represent a publicly-traded company, and you are thinking about up-listing, Colonial Stock Transfer can assist. We offer comprehensive consultation and complete transfer agent services.

Up-listing from an OTC to a National Exchange
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