Small caps last week: New Nasdaq rules, AI hurting Tripadvisor, Archer's rotorcraft

This past week, Nasdaq tightened its listing rules for companies valued at less than $5 million, putting almost 200 small companies at risk of delisting, while BTIG downgraded Tripadvisor over the growing threat AI poses to its business. Air taxi developer Archer Aviation, meanwhile, unveiled a military rotorcraft. Here are these and other stories from the small-cap space for the week of July 20-24.

The U.S. Securities and Exchange Commission has approved a new Nasdaq rule allowing the exchange to immediately suspend and delist companies whose market value remains below $5 million for 30 consecutive business days. The exchange argues that such low valuations generally signal serious business problems and make stocks more vulnerable to manipulation. Around 200 Nasdaq-listed companies are currently at imminent risk of delisting, according to calculations prepared by Freedom Broker for Oninvest.

Freedom Broker notes that, for issuers valued at $5-20 million, the risk of losing their listing is a key factor for their investment case. According to Finviz data, 557 Nasdaq-listed securities currently have market capitalizations below $20 million. 

Overall, the effect is likely to be positive, argues Freedom Broker, with fewer extremely illiquid IPOs, reverse stock splits, and potential pump-and-dump cases. The downside, it says, is that early-stage biotechs, pre-revenue tech firms, and other issuers in need of funding that have turned to the public markets will have fewer sources of capital.

BTIG has downgraded to "hold" shares of Tripadvisor, the $1.6 billion travel company. The development of AI is increasing risks to the business, while its long-term strategy remains unclear, the BTIG said.

Traffic to Tripadvisor’s sites is declining as users can get answers to their questions directly from search engines or AI assistants. The pressure is affecting not only the namesake travel site but also tours and activities booking service Viator and restaurant reservation platform TheFork. Tripadvisor has agreed to sell TheFork to payments company American Express for $700 million.

Following the downgrade, BTIG did not assign a target price to Tripadvisor shares, explaining that the sale of TheFork obscures the company’s long-term strategy. BTIG lowered its Tripadvisor revenue estimates by less than 1% to $561 million for the third quarter and $427 million for the fourth quarter.

According to MarketWatch data, the stock has eight “hold” ratings from Wall Street analysts versus four “buy” and four “sell” calls. The average target price is broadly in line with the current share price.

Air taxi maker Archer Aviation unveiled a new military rotorcraft developed in partnership with defense tech company Anduril. In response, Archer shares soared around 20% on Monday to $5.30 apiece.

The rotorcraft, Thunder, is based on a new dual-use platform suitable for both military and commercial aircraft. The new design allows it to fly farther than traditional rotorcraft. Archer has already conducted tests and plans the first full flight for 2027. At the same time, the company is completing certification of its electric air taxis and expects to launch commercial flights by the 2028 Olympic Games in Los Angeles.

Archer shares are off around 32% year to date. Wall Street nevertheless remains broadly upbeat on the company’s prospects, with six “buy” calls versus three “hold” ratings.

QumulusAI, a provider of cloud infrastructure for AI, announced a partnership with tech giant Nvidia. The "Nvidia partner" designation allows QumulusAI to offer other companies rapid access to computing capacity powered by Nvidia graphics processing units and the chipmaker’s infrastructure.

Other Nvidia partners include Nebius Group and cloud platform Crusoe Cloud. Nevertheless, QumulusAI shares plunged 33% last Friday, the day of the announcement. It was the stock’s second day of trading after going public through a direct listing the previous day. Trading opened at $38 per share, but the stock had plunged around 44% by the close on the first day.