SEC Approves NYSE’s Plan for New IPO Alternative

The Securities and Exchange Commission will allow companies to raise capital through direct listings, opening the door to a new alternative to the traditional initial public offering.

The SEC approved the new kind of direct listing—which could help startups save on bank fees and capture more of the gains in their share price when they go public—in an order posted on its website Tuesday.

The decision was a victory for the New York Stock Exchange, which had been seeking to change its rulebook to make the new process available to companies going public.

The commission rejected arguments by an influential trade group, the Council of Institutional Investors, that had sought to block the NYSE’s plan from taking effect. The council had warned that the new kind of direct-listing process would circumvent the investor protections of traditional IPOs, and it petitioned the SEC’s commissioners to review the NYSE’s proposal after staffers at the commission gave it an initial green light in August.

In a direct listing, a company floats its shares on a stock exchange, but without hiring banks to underwrite the transaction like in an IPO. Until now, companies have only been allowed to use direct listings to sell existing shares, which means their founders and early investors could cash out of their stakes, but the company couldn’t raise new capital. That has limited the process to a small number of cash-rich companies such as Palantir Technologies Inc., which went public via a direct listing in September.

from Hacker News https://ift.tt/3heEDsa