SEC allows NYSE to use Primary Direct Listings
The development of the cryptosphere does not stand still. First, the ICO was replaced by an IPO. And in 2021, the SEC approved the NYSE's proposal and allowed the introduction of an initial direct listing PDL (Primary Direct Listings)
This form of token placement is a good alternative to an IPO. With its help, it will be possible to place shares on the stock exchange without the participation of banks, and hence the underwriting services.
Until 2021, startups could only sell shares directly to their founders or early investors. Thus, it was not possible to attract new capital. That is, direct listing was available only for those projects that had at the start a sufficient amount of funds for development.
Starting in 2021, thanks to the approval of the NYSE proposal, startups will be able to offer new shares to a large number of investors on the 1st day of trading in the form of a one-time large transaction.
Direct Listings Outlook
Given the investment demand that modern startups have, the direct listing procedure will be in high demand. According to the head of NYSE Stacey Cunningham, the innovation will help to level the situation in the capital markets, giving more opportunities for ordinary investors, and for companies the opportunity to enter the open market.
Great news for capital markets - the SEC has approved the @NYSE proposal to offer issuers the ability to raise primary capital via an @NYSE Direct Listing. This innovation democratizes investor access and provides companies with another path to go public.https://t.co/0FOjNeCe3r— Stacey Cunningham (@stacey_cunning) December 22, 2020
A thorny path to victory
It is symbolic that the NYSE proposal was adopted at the turn of 2020 and 2021, when the head of the SEC was replaced. Although the request from the stock exchange was sent over a year ago. The reason for the delay is the active resistance of a group of powerful industry investors.
Representatives from the Council of Institutional Investors insisted that an initial listing would not protect investors as fiercely as an IPO. However, after considering all the details, the SEC rejected the arguments and granted permission.
It is worth noting that the Nasdaq stock exchange, which sent a similar request to the commission, is still awaiting permission. Perhaps now the matter will get off the ground. Moreover, the new head of the SEC, which we have already written about today, positively assesses the prospects for direct capital raising.
According to Elad Roizman, the NYSE will help startups obtain funding through an alternative capital raising option.
Of course, direct listing is not suitable for every project, but it is a great alternative to protecting investors' rights while maximizing the coverage of the open market.