An uplisting to a national exchange is an important goal for many small over-the-counter companies in order to gain credibility and reach a wider base of potential investors. By holding companies to a higher standard, an uplisting creates a higher level of visibility, exposure, and legitimacy for companies that are able to meet the stringent prerequisites.
For experienced executives, who have been successful with dealing with higher exchanges uplisting to the NYSE-MKT for example, is a much easier and attainable objective.
The New York Stock Exchange acquired the American Stock Exchange in 2008 and branded it the NYSE-MKT. This is an attractive exchange for high-quality micro and small-cap companies with four different listing and public shareholder standards and a number of differing combinations within. As a result, the NYSE-MKT listing requirements offers flexibility to companies operating in different market sectors.
The NYSE-MKT listing board also conducts a subjective review of all listing candidates looking at a number of different factors influencing investment quality, including:
- Nature of a company’s business;
- Market for its products;
- Reputation of its management;
- Historical record and pattern of growth;
- Financial integrity;
- Demonstrated earnings power; and
- Future outlook
Innovus Pharma (INNV) is preparing for an uplisting to the NYSE MKT, according to its President & CEO Dr. Bassam Damaj’s last conference call. The company has been experiencing significant growth that could translate into larger volume and increase in its market cap. Although a lot of OTC companies’ executives state that their goal is to uplist their companies, relatively few executives actually have the expertise to accomplish the task. Uplisting a company requires more than the meeting the uplisting share price and shareholder equity requirements.
The two most important requirements are:
- Management and their previous history and expertise: Innovus Pharma management has a strong CEO who knows how to work with higher exchanges at previous companies like Apricus Biosciences (previously known as NexMed). At Apricus Biosciences, he transitioned the company from being deficient in every listing requirement with the NASDAQ exchange to being compliant in all requirements in less than a year after he took over the helm in 2009 (Source: APRI SEC filings). Under his leadership, Apricus went from $0.17 a share to over $5 and was named one of the most liquid companies NASDAQ. The company went on to be included in the Russell Microcap Index.
- Company Future Outlook: This is a very important requirement as it shows that the company is a real business with growth potential in the near term and worth being uplisted and followed by analysts. Innovus has created a solid growth model and its management is executing on its plans on a daily basis. The company has a robust product pipeline in multiple markets. It expects an ANDA action from the FDA during the summer for FlutiCare, for allergic rhinitis, one of the largest markets in the US.
Since January 2016, the Company’s share price has gained 107% and it volume increased by 1100%.
The Rewards of Uplisting Are Well Worth the Effort
Once a company does manage to prove itself and satisfy uplisting requirements, the benefits are both impactful and immediate. The biggest benefit is increased visibility. Whereas a lower listing confined a company to simple over the counter exchanges between individuals, a bigger listing gives a company access to the larger institutional investors. These institutional investors can start to accumulate positions adding more credibility and liquidity, as well as, potentially, share appreciation.
Newly uplisted companies also benefit from higher trading volumes (greater liquidity). Studies from large exchanges, such as the NASDAQ, confirm that, after uplisting, companies tend to see 3-month average daily volume increase of a 132%.
In the early periods after uplisting, a company usually gets intense coverage from top analysts, thereby making the company’s stock more attractive to investors. In the end, uplisting is one of the many tools a company can utilize to help create long-term shareholder value for a company with a solid management business plan.