INSUBCONTINENT EXCLUSIVE:
The New York Stock Exchange filed paperwork this morning with the U.S
Securities and Exchange Commission to allow companies to raise capital as part of a direct listing.Direct listings are a way for companies
to go public by selling existing shares held by insiders, employees and investors directly to the market, rather than the traditional method
Direct listings have become increasingly popular since Spotify’s 2018 exit, which allowed its employees immediate liquidity, removed
preferred access from bankers and allowed for market-driven price discovery
Companies, like Spotify, that opt to complete a direct listing are able to bypass the financial roadshow, thus avoiding some of Wall
Historically, however, these companies have not been able to raise fresh capital as part of the process.The NYSE’s new proposal seeks to
Specifically, the stock exchange plans to amend Chapter One of the Listed Company Manual, which outlines the NYSE’s initial listing
requirements for companies completing initial public offerings or direct listings
If the amendment is approved—the NYSE is subject to the regulatory oversight of the SEC—companies going public on the NYSE will be
permitted to raise capital through a direct listing.The document states the proposed change “would allow a company that has not previously
had its common equity securities registered under the Act, to list its common equity securities on the Exchange 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
Exchange (a “Primary Direct Floor Listing”)
The proposal would permit a company to conduct a Primary Direct Floor Listing in addition to, or instead of, a Selling Shareholder Direct
Floor Listing.”The proposed hybrid model is likely to appeal to Silicon Valley tech startups, who’ve grown more familiar with the
innovate route to the public markets following Spotify and Slack’s direct listings
On the backs of these exits, tech industry leaders have touted direct listings as the latest and greatest path to the public markets
Venture capitalist Bill Gurley, in particular, has encouraged companies to consider the method
Meanwhile Silicon Valley darling Airbnb, which has stated its intent to go public in 2020, is said to be considering a direct listing rather
than a traditional IPO.Gurley, who has expressed his discontent with bankers’ inability to adequately price IPOs, recently hosted a
one-day conference focused on direct listings titled Direct Listings: A Simpler and Superior Alternative to the IPO
The event was attended by members of tech’s elite, including Sequoia Capital’s Mike Moritz and Spotify chief financial officer Barry
McCarthy .“Most people are afraid of backlash from the banks so they don’t speak out,” Gurley told CNBC earlier this year of his
decision to publicly advocate for direct listings
“I’m at a point in my career where I can handle the heat.”
