The U.S. Securities Regulatory Agency stated on Tuesday (22nd) that startups wishing to go public will be able to raise funds on the New York Stock Exchange (NYSE) through direct listing and auction them on the market at a public offering price, breaking the tradition of many years In addition to benefiting investors to participate in the IPO, it can also help companies save underwriting fees paid to banks.
The United States Securities and Exchange Commission (SEC) announced on Tuesday that it approved the New York Stock Exchange’s “direct listing” plan, allowing startups that want to go public to raise funds directly on the NYSE and sell stocks to investors.
The new measures will subvert the traditional IPO process. For decades, investment banks have arranged all kinds of IPOs and have been behind many listed companies. The new measures will help save the high underwriting fees in the IPO process. These fees are the main obstacles for companies seeking to go public. For start-up companies good news.
The SEC’s opening of direct listings may make direct listings more common. Stacey Cunningham, president of the New York Stock Exchange, said in a statement: “This will change the rules of the game in the capital market, provide investors with a level playing field, and provide another way for companies to seek listing.”
In recent years, examples of direct listing have gradually increased. In 2018, the music streaming media Spotify (SPOT-US) Is listed in this way, and this year Palantir (PLTR-US) Yo Asana (ASAN-US) 。
One of the possible reasons why companies and venture capitalists prefer direct listing is to avoid the huge gap between the issue price set by the bank and the stock price on the first day of trading.
For banks, although the income from underwriting fees is missing from direct listing, they can still earn consulting fees from companies that intend to go public. For example, Palantir, which chose to go public this year, paid tens of millions of consulting fees in the process.
According to the NYSE plan, when the stocks of listed companies start trading and change hands, the trading order of new stocks takes priority over second-hand stocks, which means that companies have a greater chance of achieving funding goals without waiting for the lock-up period to end.
Benchmark venture investor Bill Gurley is very excited about the SEC’s innovation. He said that SEC approval is very important to the market and hopes to end the price difference that has existed for 40 years and the outdated IPO process.
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