SEC Approves NYSE Proposal To Let Companies Raise Cash Through Direct Listings

The United States Securities and Exchange Commission on Wednesday approved a rule change proposed by the Intercontinental Exchange Inc ICE-owned New York Stock Exchange to allow companies that use the direct listing route to raise capital. 

What Happened: The market regulator approved the NYSE proposal to let companies raise capital by issuing fresh shares in a new variety of direct listing, according to a statement.

Prior to the rule change, companies couldn't raise capital in direct listings. 

“We are not trying to displace the IPO. We are trying to create more options for companies and investors seeking to tap into the public markets,” NYSE Chief Commercial Office John Tuttle told Reuters.

Some companies like the work-oriented messaging platform Slack Technologies Inc WORK have used direct listings to go public. This saves the company from paying a 6 to 7% fee to underwriters, according to ClickIPO CEO Scott Coyle.

Why It Matters: Nasdaq Inc. NDAQ also proposed a rule change with the SEC to let companies raise capital through direct listing this week. 

Spotify Technology SA SPOT was a frontrunner in the pursuit of direct listings in 2018 when it became the largest company ever to attempt to go public using this route. 

A number of direct listings are scheduled for 2020. This week, Peter Thiel-led Palantir Technologies filed to go public on the NYSE, even as it said it may never achieve profitability. 

Work management company Asana Inc. also announced it was filing to go public through a direct listing on the same exchange.

Price Action: Intercontinental Exchange shares closed 0.54% higher at $105 on Wednesday.