Making the short list

Arguably one of the world’s foremost large-cap growth index, the Nasdaq-100® is comprised of the 100 largest domestic and international non-financial companies listed on the Nasdaq Exchange based on market capitalization. Literally, these are today’s ‘blue chip’ stocks—category-defining companies like Apple, Microsoft, Alphabet, Tesla, and Amgen who have thrived in the forefront of innovation.

Just becoming listed to trade on the Nasdaq exchange is a rigorous approval process. Only companies with impeccable reputations, strong track records of performance, and highly respected management teams are considered for inclusion. The Nasdaq Stock Market offers three distinctive US market tiers. The Nasdaq Global Select Market has the strictest listing requirements—consisting of:

• At least 1.25 million publicly traded shares (excluding those held by company executives or other owners who control 10% or more of the company);
• A regular bid price of the company's stock shares of at least $4 at the time of listing;
• At least 450 round lot shareholders (i.e., owning at least 100 shares), 2,200 total shareholders, or 550 total shareholders with a 1.1 million average trading volume over the past 12 months;
• A minimum of 3-4 market markers for the company’s stock; and
• A minimum of 450 shareholders with 100+ shares each; more than 2,200 total shareholders; or at least 550 total shareholders with an average trading volume of 1.1 million shares over the past year.

Additionally, companies must meet one or more of the following financial thresholds to be listed on the exchange:

• Total cumulative pre-tax earnings for the prior three years of at least $11 million (at least $2.2 million over the previous two years; and no single year net loss over the previous three years);
• Total aggregate cash flow of at least $27.5 million over the last three fiscal years (with no single year experiencing a negative cash flow); and previous fiscal year revenues of at least $110 million; and/or
• An average market capitalization of $850 million or more over the past 12 months, and prior fiscal year revenues of at least $90 million.

Even after a company is approved, it must maintain these standards to continue trading on the exchange—and failure to do so will result in the stock being delisted.

To then be selected for the Nasdaq-100, companies must not only be one of the 100 largest market capitalization stocks on the exchange, but their stock also must be classified as ‘non-financial’ (any industry other than Financials) according to the Industry Classification Benchmark (ICB) and they must have a minimum average daily trading volume of 200,000 shares.

Additional new diversity requirements

Just this past August, the SEC approved a new listing rule submitted by the Nasdaq exchange designed to advance board diversity and improve corporate governance through greater transparency. This ‘comply or disclose’ framework requires Nasdaq-listed companies to:

• Disclose aggregated statistical information about their board’s gender, racial, and LGBTQ+ make-up (reporting will be voluntary and self-identified) for both the current and prior year; and
• Either include (or publicly disclose why they do not meet the mandate), a certain number of ‘diverse’ directors on their board.

Starting in 2022 and phasing in throughout 2023, the goal of these new listing requirements is to incent all Nasdaq-listed companies (other than certain ‘exempt entities’) to have at least two self-identified diverse members on their board of directors—with at least one self-identifying as Female and at least one self-identifying as an Underrepresented Minority and/or LGBTQ+. Companies that fail to meet this requirement will have to explain the reason in writing or risk delisting.

Numerous studies have shown a positive correlation between board diversity and both financial performance and corporate governance. So, the ultimate purpose of this new rule is to provide investors with a clearer understanding of each listed company’s current board composition and instill greater confidence that those firms are actively considering diversity in board member selection.

For over 20 years, the Invesco QQQ ETF has been tracking the exclusive Nasdaq-100 Index. And we believe these stringent requirements have helped play a major role in helping to build a history of performance that’s made it the #1 best-performing large-cap growth cap fund (1 of 317) based on total return over the past 15 years according to Lipper ratings, as of December 31, 2021.

See standardized performance. Performance quoted is past performance and cannot guarantee of comparable future results; current performance may be higher or lower. Visit invesco.com/qqqperformance for the most recent month-end performance. Investment returns and principal value will vary; you may have a gain or loss when you sell shares. Fund performance reflects fee waivers, absent which, performance data quoted would have been lower. Invesco QQQ’s total expense ratio is 0.20%. High, double-digit and/or triple-digit returns are highly unusual and cannot be sustained.

Lipper fund percentile rankings are based on total returns, excluding sales charges and including fees and expenses, and are versus mutual funds, ETFs and funds of funds in the category tracked by Lipper. Source: The Lipper one-year rank 19% (128 of 675), five-year rank 2% (9 of 559), 10-year rank 1% (1 of 435), 15-year rank 1% (1 of 317) as of December 31, 2021.