On August 26, 2020, a new type of direct listing on the New York Stock Exchange was approved by the SEC. This rule change that would allow companies going public to raise capital through a primary direct listing instead of a traditional IPO.
On August 31, 2020, however, the SEC stayed this approval until further notice due to objections from the Council of Institutional Investors (CII), who announced an intention to petition for review of the new rule. It’s unclear how long the SEC will take to conduct its review.
Direct listings differ from IPOs in that public investors, not institutional investors or big banks, determine the value of a company’s shares from the outset. If ultimately effective, direct listings offer advantages including reduced transaction costs and restrictions and in theory, should broaden the scope of businesses that can pursue one beyond those already flush with cash.
