Market Capitalization Rule
What is the Market Capitalization Rule?
The market capitalization rule is a regulation that places a floor on the total value of a company's stock for 30 consecutive days.
How Does the Market Capitalization Rule Work?
The market capitalization rule was established by the New York Stock Exchange (NYSE) in 2004. It places a minimum limit on the total value of a registered company's outstanding shares, or a market capitalization. The rule states that a company's market capitalization cannot remain lower than $25 million for a period of more than 30 days in a row. If it is lower than $25 million for longer than 30 days, the listing will be removed from the stock exchange.
For example, if a company's stock trades at a price low enough to render its market capitalization at $20 million for 31 days, that company will be delisted and its stock will no longer be traded on that exchange.