The Wall Street policeman validates a hybrid form of IPO on the New York market making it possible to raise funds through a direct listing.
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The US authority overseeing the stock markets, the SEC, has given the green light to a new hybrid form of IPO proposed by the New York Stock Exchange, making it possible to raise funds through direct listing.
This atypical process, used in particular by the music streaming giant Spotify, allows existing shareholders (founders, employees, primary funders) to sell their stakes on the market and thus recover money for themselves.
It is cheaper because it avoids bank charges and it is subject to fewer restrictions than a traditional IPO.
But this method also prevents the companies using it from issuing new shares and therefore recovering new money for the company.
With the new solution approved Wednesday evening by the SEC, a company will be able to issue new shares on the first day of the listing, as in a traditional IPO.
This innovation is intended to attract more companies to the stock exchanges.
In recent years, many start-ups have chosen to wait longer than expected before going public, or to abandon them altogether.
Thanks to the low interest rates, they can raise money quite easily directly from banks or venture capital companies, for example.
Some are also reluctant to pay the heavy fees demanded by investment banks preparing for a traditional IPO. These banks are regularly criticized for setting an introductory price that is too low, for the benefit of their customers who can thus benefit from a possible jump in the share at the time of the first listing.
Another method currently in vogue is to go through a “Special purpose acquisition company” or Spac, a kind of empty shell prepared by investment companies with no particular purpose originally.
Their creators just promise investors the acquisition in the following months of one or more companies that will be able to find themselves listed without having to go through the long process of traditional IPO.
This method has recently been used in particular by the manufacturer of electric trucks and hydrogen trucks, Nikola.
Also the stock markets seek to regain the favor of companies by offering new ways to go public.
The Nasdaq platform thus filed with the SEC earlier this week a file for a new hybrid form between direct listing and traditional fundraising, similar to that proposed by the NYSE.
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