Nasdaq has long been regarded as the "home turf" for technology stocks, with tech giants like NVIDIA (NVDA), Apple (AAPL), and Microsoft (MSFT) all listed on this exchange. However, on another segment of this exchange, a surge of new low-priced IPOs initiated by overseas small enterprises with questionable financial prospects is emerging en masse.

Among the companies that completed IPOs last month was a Cayman Islands-registered firm that provides maintenance services for Malaysian shrimp farms, employing just 4 people. This company, named Megan Holdings (ticker: MGN), set its IPO price at $4 per share, raising a total of $5 million.

Over the past two years, IPOs from such microcap companies have surged dramatically, representing another signal of speculative fervor sweeping across multiple sectors of the investment world. These stocks often initially attract retail investors before experiencing significant price declines; some stocks have seen remarkable price surges after announcing name changes or ventures into cryptocurrency or artificial intelligence sectors.

Nasdaq has pledged to address these issues and filed an application with the Securities and Exchange Commission (SEC) on September 3 to tighten listing standards, with particularly strict restrictions on small Chinese concept stocks. Previously, investors and lawmakers have criticized such listing projects as becoming a "breeding ground" for fraud and market manipulation. However, the SEC's final approval of this application may still take several months.

While awaiting approval, Nasdaq continues to approve IPO projects that would not meet its proposed new standards. What remains puzzling is why Nasdaq initially allowed so many problematic companies to go public. Although each IPO generates higher listing fees and trading volumes for the exchange, this revenue is negligible compared to the potential losses to investors and damage to its own reputation.

A Nasdaq spokesperson declined to comment on this matter.

Even while applying to tighten listing standards, Nasdaq has no plans to raise the minimum IPO offering price. Currently, the exchange's general floor for IPO pricing is $4. For many inexperienced individual investors, low-priced stocks appear "cheap"; meanwhile, promoters prefer low-priced, low-volume stocks because they are easier to manipulate – prices can be more easily inflated before the final sell-off.

Today, investors should be aware that low-priced stocks may pose risks to their financial situation, yet many still fall into these traps.

Jay Ritter, Professor Emeritus of Finance at the University of Florida, has been tracking the IPO market since the late 1970s. His research shows that among low-priced stocks that completed IPOs in 2024 and had one-year return data available as of September 30, the average decline from the offering price reached 37%; for low-priced stock IPOs from 2001 to 2023, the average three-year decline was as high as 62% (for stocks listed for less than three years, Ritter used shorter-period statistical data).

Despite dismal performance, the number of low-priced stock IPOs (typically defined as stocks with offering prices below $5) has surged significantly. According to Ritter's data, from early 2024 through September 30, US exchanges saw 164 low-priced stocks complete IPOs, with 147 listed on Nasdaq (the remainder on NYSE American – formerly the American Stock Exchange, which has listing standards for small stocks similar to Nasdaq's but with lower prestige). This number already exceeds the total from 2001 to 2023 (only 106 during that period).

"The market audience for these stocks is retail investors lacking professional knowledge; no institutions would buy such stocks," Ritter stated. "Almost none of them have the strength for long-term survival."

Among the low-priced stocks that completed IPOs this year and last, the majority came from China (including Hong Kong and Macau). QMMM Holdings is one such example – this Hong Kong digital advertising company registered in the Cayman Islands had revenue of $2.7 million and a net loss of $1.6 million in fiscal 2024.

In July 2024, QMMM went public on Nasdaq at $4 per share, raising $8.6 million; for most of August that year, its stock price remained below the offering price. On September 9, the company announced a cryptocurrency-related strategy, causing its stock price to surge over 1,700% in a single day.

The next day, the stock price nearly halved, but the company's market value still reached $6.8 billion. On September 29, the SEC suspended trading in QMMM stock until October 10, citing "unidentified persons recommending the stock through social media, with possible manipulation of the security."

Another $4 offering price IPO stock from last year came from Junee – this Hong Kong interior design company registered in the British Virgin Islands raised $8 million through its IPO. Subsequently, the company relocated to Singapore and renamed itself "Super X AI Technology" in June.

Today, the company has a market value of $2 billion, but it has also attracted attention from short-sellers who question its artificial intelligence business capabilities. The company's latest financial report shows that in the six months ending December 31, revenue was less than $1 million with a net loss of $6.1 million.