NYSE seeks to allow firms to raise capital via direct listings instead of IPOs

The New York Stock Exchange. Photo: Angelo Giordano/Unsplash

The New York Stock Exchange (NYSE) said on Tuesday it had filed with the U.S. Securities and Exchange Commission to allow companies going public to raise capital through a direct listing, instead of an initial public offering.

This new hybrid model comes after criticism by venture capital investors of the traditional IPO, which for decades has been the route to the public markets for companies such as Amazon.com Inc, Apple Inc and Microsoft Corp.

“Will this displace the traditional IPO? No, but is it another pathway we are providing companies to come to the public markets and to have investors participate and (have) growth opportunities? Yes,” Vice Chairman and Chief Commercial Officer John Tuttle said in a telephone interview about the plan by NYSE, which is owned by Intercontinental Exchange Inc.

A direct listing has so far differed from an IPO because it does not raise fresh funds; rather, it is a way for existing investors to monetize their shares.

In 2018, music streaming business Spotify Technology SA pioneered direct listing followed in 2019 by communication platform Slack Technologies Inc. Both had successful market debuts but their share prices have since struggled.

Venture capital investors have backed direct listings as a better way to price newly public shares. Direct listings also avoid restrictions on stock sales by insiders, which often includes venture capitalists, and are less costly than an IPO, in which companies pay banks to underwrite a share offering and to stabilize their share price if needed.

In this new direct model, all of the shares being offered by a company – so-called primary shares – are to be sold in the first trade to a variety of buyers. Stock owned by existing investors – referred to as secondary shares – can be sold throughout the first day of trading.

The new model will make a direct listing more attractive to companies but it will not dislodge the IPO overnight as the most popular route to the public market, according to Greg Rodgers, a partner law firm Latham & Watkins who worked on the Spotify and Slack offerings.

“For the foreseeable future, issuing primary capital in this way will be quite novel,” Rodgers said.

Bill Gurley, a partner at venture capital firm Benchmark Capital and one of the biggest proponents of direct listings, has complained banks have been “fleecing” companies by pricing shares low so that they pop on their first trading day.

Reuters 

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.