(News Bulletin 247) – The flagship index of American tech, known for housing the largest listed companies in the world, is also a promised land for small companies with a more than opaque profile.

The Nasdaq index is regularly cited by stock market commentators – including us – and in particular its components known under the umbrella name of the “Magnificent Seven” of Wall Street (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, Tesla).

It must be said that for several years, American tech stocks have gained significant weight on Wall Street. The seven aforementioned stocks have a total market capitalization of $19.39 trillion, according to companiesmarketcap.com. That is, more than six times the entire CAC 40, whose overall capitalization is 2,503 billion euros.

It’s not just tech… small companies too

But on the other side of the spectrum, small foreign companies with questionable financial profiles are fueling the procession of new listings on the Nasdaq, noted the Wall Street Journal.

Among the latest IPOs, the Wall Street Journal cites Megan Holdings, a company registered in the Cayman Islands, providing maintenance services for shrimp farms in Malaysia and with only four employees. This company recently managed to raise $5 million.

In July 2024, it was QMMM Holdings, a Hong Kong digital advertising company, which took its first steps on the world’s best-known technology index. This company, also based in the Cayman Islands, posted losses of more than $1 million at the time of its IPO. However, she managed to raise nearly 9 million dollars.

For more than a year, the price of this company moved below its introductory price of 4 dollars, before exploding at the beginning of September 2025. During the session of September 9, QMMM then gained 1,700%, after announcing a strategic shift based on the purchase of cryptocurrencies.

On September 29, the Securities and Exchange Commission (SEC), the watchdog of the American Stock Exchange, suspended the trading of QMMM shares until October 10, citing “potential manipulation of securities” through stock market recommendations issued by “unknown people via social networks”.

The SEC has also cracked down in recent weeks, demanding the suspension of the trading of shares in the Indonesian tour operator Nusatrip, the cosmetics groups Empro Group and Pitanium Limited, also of Asian origin. The reasons for these suspensions are exactly the same as for QMMM shares, namely suspicion of price manipulation.

Wobbly performance

Over the past two years, many very small foreign companies have chosen the Nasdaq to go public. The conditions for entry into the index are flexible, with a minimum price set at $4 each. Which places Nadsaq as a welcoming place for these companies with an opaque profile.

Remember that the SEC defines “penny stocks” as stocks whose price is less than $5 per share. In Paris, this threshold is much lower, since a stock that prices below the symbolic euro is labeled a “penny stock”.

In 2025, there are currently 82 “$4 apiece” companies that have made their IPO on the Nasdaq, compared to only 8 on the NYSE, according to a count from the Wall Street Journal. In 2021, there were only 10 who dared to cross the Nasdaq door.

And the stock market performance of these companies is like them: shaky. According to a study by Jay Ritter, professor emeritus of finance at the University of Florida, cited by the Wall Street Journal, among 2024 penny stock IPOs for which one-year returns were available as of September 30, stock prices on average fell 37% from the offering price. For penny stock IPOs between 2001 and 2023, the three-year average decline was even 62%.

“The market for these stocks is made up of unsophisticated retail investors. There are no institutions buying these securities,” Jay Ritter said. “It is quite rare that one of them has a capacity for long-term resistance,” he continued.

Safeguards for the future?

These low-priced shares appeal to less seasoned investors, surely seduced by the prospect of copious gains with a low initial investment. At the beginning of September, the stock market operator Nasdaq asked the SEC to tighten the screws on its listing criteria, particularly for small Chinese companies.

This reflection follows criticism from investors and legislators, who believed that these quotations had become fertile ground for the “pump and dump” technique, or “kettle” in French. This stock market scam consists of promoting stocks in advertisements or private messaging loops with the aim of artificially inflating their price.

The FBI reports a 300% increase in securities fraud complaints in 2025, Investopedia reported. In July 2025 alone, investors lost $3.7 billion when seven Chinese penny stocks fell more than 80% after being aggressively promoted online, according to the Financial Times.

The operator proposes to establish much stricter Nasdaq listing standards than currently. They could concern the minimum size of offers and the fundraising of certain companies during IPOs. It also also proposes stricter delisting procedures for companies that do not meet Nasdaq’s continued listing standards and whose market value of listed securities is less than $5 million.

The other line of work involves a minimum deal size requirement of $25 million for new listings of companies operating primarily in China.

The American financial policeman will not make a decision for months, which explains why Nasdaq has authorized new listings of microcapitalizations in the meantime. The last being Neutrans, a company with 12 employees. It provides fiber optic infrastructure in Malaysia. The company, which aims to raise up to $9 million in its IPO, is offering its shares at a price of between $4 and $6 apiece.

In the middle of the proposed range, Neutrans would have a market capitalization of $119 million. Or 39 times its annual revenues for its financial year ending at the end of March 2025.

A summer resumption of IPOs in the United States

More generally, the United States recorded between July and the end of September 2025, its best quarter in terms of IPOs since the fourth quarter of 2021, according to the latest study “EY Global IPO Trends Q3 2025” from the EY firm. This IPO market was paralyzed last spring because of Donald Trump’s tariffs.

This recovery was fueled by 24 transactions that raised $100 million or more, including five IPOs that raised more than $1 billion each, notes EY. In September alone, $8 billion was raised through IPOs, making it the most active month since November 2021.

Among these companies which dared to take the plunge last month, Klarna, which had postponed its project a little earlier this year due to the upheavals in the markets caused by Donald Trump’s customs duties. The patience of the Swedish deferred payment specialist has been rewarded. Klarna successfully completed its IPO, raising $1.37 billion, more than its initial target of $1.27 billion.

A dynamism which gave ideas to Strava, the company behind the eponymous application very popular with athletes for monitoring their performances. The management of the American group confirmed this week that it wanted to go public to finance new acquisitions, without putting forward a precise timetable.