THE $0.25 TARGET
NakedShortStop™ Special Report
How a Rule Designed to Protect Investors Could Create a Regulatory Cliff for Small Public Companies
🟢 ACTIVE REPORT — Additional chapters will be published as our review of the regulatory record continues.
PART ONE – THE REGULATORY CLIFF
Beginning July 1, 2027, a single trading day could fundamentally change the future of a small public company.
Under a new NYSE American rule approved by the Securities and Exchange Commission on August 14, 2026, if a listed security closes below $0.25 per share on any trading day, the Exchange shall immediately suspend trading and commence delisting proceedings.
Not thirty consecutive trading days.
Not ten.
Not five.
One.
The rule represents a significant change from NYSE American’s existing practice. Exchange staff currently engages with companies whose shares trade below $1.00 and has maintained a policy of initiating suspension and delisting procedures when a security trades below $0.10.
The new rule raises that critical threshold to $0.25 – and codifies it.
NYSE American says there is a reason.
According to the Exchange, very-low-priced securities are more susceptible to volatility and market manipulation because less capital is required to undertake manipulative trading activity. The Exchange further argued that securities falling below $0.25 are unlikely to recover to any meaningful degree.
The SEC agreed.
In approving the rule, the Commission concluded that it was consistent with the Exchange Act’s requirements that exchange rules be designed to prevent fraudulent and manipulative practices and protect investors and the public interest.
On its face, the objective sounds straightforward:
Protect investors from securities considered particularly vulnerable to manipulation.
But the mechanism chosen to accomplish that objective raises a very different question.
When a Stock Price Becomes a Trigger
At $0.26, a company remains above the new minimum.
At $0.25, it remains above the rule’s less-than-$0.25 trigger.
But one closing price of $0.24 changes everything.
The Exchange is directed to immediately suspend trading and begin delisting proceedings.
There is no requirement that the security remain below $0.25 for an extended period before the trigger operates.
There is no mandatory cure period allowing the company to restore its share price.
And the rule does not require NYSE American first to determine why the stock crossed the threshold.
That distinction matters.
A company’s share price can decline for any number of reasons: deteriorating fundamentals, disappointing results, financing requirements, dilution, broader market conditions, legitimate short selling – or potentially manipulative trading.
Yet the $0.25 trigger responds to the price, not necessarily the cause of the price.
Suspend First. Ask Questions Later?
An issuer retains the right to appeal an NYSE American delisting decision.
But an appeal does not erase what has already happened.
Trading can already have been suspended.
The company can therefore find itself challenging the decision after its shares have been removed from normal exchange trading.
That creates an important distinction between procedural protection and economic protection.
An eventual successful challenge may address the listing decision.
It cannot necessarily reverse financing opportunities lost during a suspension, restore liquidity that disappeared, repair investor uncertainty created by the suspension, or undo corporate decisions forced upon management while the company’s securities could no longer trade normally on the exchange.
For a large corporation with substantial cash reserves, those consequences may be manageable.
For a small public company dependent upon capital markets for survival, they can be considerably more serious.
The Alternatives
Critics of the proposal did not simply object to stricter listing standards.
They proposed alternatives.
Among the approaches presented during the rulemaking process were mechanisms that could have considered a security’s price over multiple trading days, provided a limited cure period, increased monitoring around the threshold, or considered additional indicators of the issuer’s financial and market condition before imposing the ultimate consequence of suspension and delisting.
NYSE American rejected the central premise of allowing very-low-priced securities additional time to remain trading while they attempted to regain compliance.
Its reasoning returned to the same concern:
Manipulation.
Very-low-priced securities, the Exchange argued, present heightened risks of volatility and manipulation.
Allowing them to continue trading while a compliance period runs could therefore expose investors to those risks for longer.
The SEC ultimately agreed.
But the SEC’s Own Numbers Raise a Question
The Commission did not rely entirely upon NYSE American’s assertions.
It examined historical trading data of companies that crossed below the proposed $0.25 threshold.
According to the SEC, approximately 55% of those securities remained below $0.25 180 days later.
The Commission viewed those findings as evidence that securities crossing the threshold may remain below $0.25 for an extended period and may have heightened susceptibility to manipulation.
At first glance, that appears to support the rule.
But it is only part of the story.
Introducing the Evidence
Commenters questioning the proposal submitted a separate twenty-year empirical analysis examining approximately 323 companies that had fallen below the same $0.25 threshold.
According to that analysis, nearly 90% subsequently traded above $0.25 at least once.
Even more striking, 74 companies remained listed as of December 2025, representing approximately $20.1 billion in combined market capitalization.
Those figures were submitted as part of the public comment process and were not generated by the SEC.
That distinction is important.
Recovering above $0.25 at least once does not establish that every company ultimately became financially healthy, nor does it demonstrate that every company crossing the threshold deserves continued exchange listing.
But the data raise a legitimate policy question:
Does crossing $0.25 on a single trading day reliably identify a company whose shareholders should immediately lose access to exchange trading?
The SEC ultimately concluded that it did not need to.
NYSE American is entitled to establish standards governing the companies whose securities trade on its market.
That is a legitimate regulatory objective.
But something unusual happens when the standard chosen is based upon one closing price.
It creates a line.
$0.25
Every market participant can see it.
Every algorithm can see it.
Every short seller can see it.
Every shareholder can see it.
And every company approaching it knows exactly what happens on the other side.
That doesn’t mean anyone will manipulate a security through the threshold.
It doesn’t mean legitimate short selling becomes improper merely because a company approaches $0.25.
And it certainly doesn’t mean every company trading at these levels is financially healthy.
But it does mean something that deserves examination:
The economic significance of moving a stock from $0.26 to $0.24 is no longer limited to a two-cent decline.
That movement can now carry a regulatory consequence.
And that consequence may dramatically increase what is at stake for everyone positioned on either side of the trade.
Which brings us to the question the SEC was explicitly warned about before approving the rule:
Could a threshold intended to protect investors from manipulation inadvertently create a target for it?
NEXT: PART TWO – THEY WARNED THE SEC
The manipulation concern was not invented after the rule was approved.
Public companies, executives, market participants and other commenters raised it beforehand.
Some warned that a single-day $0.25 trigger could encourage coordinated short selling.
One submission went considerably further, describing the proposed rule as potentially creating a “roadmap for predatory short selling.”
The SEC heard those warnings.
Part Two examines exactly what it was told.
PRIMARY SOURCES
SEC Order Granting Approval – Release No. 34-106134
SEC Public Comment Record – SR-NYSEAMER-2025-72
AtlasClear Supplemental Analysis – Market Manipulation and Predatory Short Selling
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