On December 22, 2020, the Securities and Exchange Commission (the “SEC”) approved the proposal submitted by the New York Stock Exchange (“NYSE”) that allows companies to conduct concurrent primary offerings as part of a direct listing on the exchange. The NYSE’s proposal had been put on hold since August, following the SEC’s receipt of a notice of intention to petition for review submitted by the Council of Institutional Investors. As a result of the approval, a company undertaking a direct listing on the NYSE may issue new shares and sell these to the public on its first trading day without conducting a firm commitment underwritten offering. Previously, private companies that chose to undertake a direct listing on the NYSE undertook the listing together with registering with the SEC the resale of shares by their existing shareholders. The NYSE will deem a company to have met the applicable aggregate market value of publicly-held shares requirement in order to proceed with the direct listing coupled with a primary offering if the company sells at least $100 million in market value of its shares in the NYSE’s opening auction on the first day of trading. Alternatively, the NYSE will determine that the company has met its market value of publicly-held shares requirement if the aggregate market value of the shares the company will sell in the opening auction on the first day of trading and the shares that are publicly-held immediately prior to the listing is at least $250 million, with the market value calculated using a price per share equal to the lowest price of the price range established by the company in its registration statement. Generally, the companies that have elected to pursue direct listings to date have raised capital in private placement transactions and have sought to undertake the direct listing principally as a means of providing liquidity to existing shareholders. This new alternative provides greater flexibility, making direct listings an option for many more companies.
A link to the SEC’s approval of the NYSE proposal can be found here.