On November 26, 2019, the New York Stock Exchange (“NYSE”) filed with the Securities and Exchange Commission (“SEC”) a proposed rule change that would allow companies to simultaneously go public through a direct listing and raise cash from public market investors as an alternative to a traditional initial public offering. The proposed change would allow a company that has not previously had its shares registered under the Securities Act to list its shares on the NYSE at the time of effectiveness of a registration statement pursuant to which the company will sell shares in the opening auction on the first day of trading on the NYSE.
In the recent past, companies with sufficient capital (such as Spotify and Slack) have opted to pursue a direct listing in order to provide their existing shareholders with liquidity without issuing new shares. The NYSE’s proposed rule change seeks to incorporate an option to raise capital into the existing direct listing alternative and provide companies with a new pathway to access public markets. The proposed rule change is now subject to public comment and the SEC’s review. A copy of the proposed rule change is available here.
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