U.S. Securities and Exchange Commission announced on Tuesday it has approved NYSE Group Inc.’s plan for direct listings, according to Bloomberg. The move allows Silicon Valley hot tech companies and startups to raise money on the New York Stock Exchange without paying huge fees to Wall Street banks.
- Critics have warned that SEC’s decision could erode crucial investor protections since investment banks guided share sales and stock allocations to institutional investors.
- The SEC sign-off of NYSE’s plan follows months of wrangling, including an earlier decision this year to halt consideration of the proposal at the request of the Council for Institutional Investors (CII)
- Direct listings will make it difficult for shareholders to sue over material misstatements or omissions made during the IPO process-CII
- NYSE has rejected the idea that the listing changes will increase risks to investors and said SEC decision levels the playing ground for investors and companies seeking to go public
- Venture capitalist Bill Gurley has lauded SEC’s decision as “HUGE” and will end 40 years of mispriced IPOs through an old antiquated process.
- Despite being sidelined in underwriting direct listings, investment banks will still make money advising companies that go public.
- Some company advisers still believe the SEC ruling will not deter businesses from pursuing traditional IPOs.
- It is not clear if an SEC chief picked by President-elect Joe Biden would approve NYSE’s proposal.
Renaissance IPO ETF is up 119.27% this year.