December 9, 2019

Direct Listings: SEC Rejects NYSE’s “IPO” Proposal

That was fast. On Friday, Reuters and other sources reported that the SEC rejected the NYSE’s proposed rule change that would have permitted companies to sell newly issued primary shares via a direct listing – which had been submitted the week before.

Broc just blogged last week about the proposal being somewhat controversial. We aren’t sure what aspect of it prompted the rejection – but it’s not uncommon for these types of things to go through a few iterations and this Wilson Sonsini memo speculates that perhaps additional SEC rulemaking is necessary to make primary listings possible. The NYSE says it’s continuing to work with the SEC on a “direct listing product” – so it’s probably not the last we’ll hear of this path to going public.

Direct Listings: Nasdaq’s “Resale” Rule Extended to Its Global & Capital Markets

Last week, the SEC approved this recent Nasdaq proposal that will allow “resale” direct listings on the Nasdaq Global Market and the Nasdaq Capital Market – an extension of an already-existing rule that allows these types of direct listings on the Nasdaq Global Select Market.

This Wilson Sonsini memo summarizes the final rule – and explains how the valuation parameters for companies listing shares on Nasdaq’s Global and Capital Markets differ slightly from what applies to the Nasdaq Global Select Market.

Nasdaq Proposal: Excluding Restricted Shares from “Publicly Held” Calculation

The exchanges have been busy. A couple weeks ago, Nasdaq filed this rule proposal that would require listed companies to provide Nasdaq with info about the number of their non-affiliate shares that are subject to trading restrictions – e.g. due to lockups or standstills, private offering restrictions, etc. – if the exchange observes unusual trading activity that implies limited liquidity.

Under the proposed rule, Nasdaq could also halt trading in connection with the request and could require companies with inadequate “unrestricted public float” to adopt a plan to increase the number of unrestricted shares. Nasdaq already has a similar rule for initial listings, but this would extend the concept to continued listing rules.

The SEC posted the rule for comment last week, so we likely won’t know for at least a couple of months whether this rule will be approved in current form or at all.

Liz Dunshee