July 29, 2022

Direct Listings: SEC Appears Lukewarm on NYSE’s Proposed Pricing Flexibility

Last week, the SEC posted this order instituting proceedings on a proposed NYSE rule change to modify pricing limitations for securities listed on the Exchange via a primary direct listing. The proposal was filed back in April and the Commission had only received one comment when it instituted these proceedings, despite an extension of the consideration period. Here’s more detail:

The Exchange has proposed to modify the Price Range Limitation to provide that a Direct Listing Auction for a Primary Direct Floor Listing may be conducted if the Auction Price is outside of the price range established by the company in its effective registration statement (the Issuer Price Range) but is either (i) at or above the price that is 20% below the lowest price or at or below the price that is 20% above the highest price of the Issuer Price Range or (ii) above the price that is 20% above the highest price of the Issuer Price Range.

The NYSE believes that this pricing flexibility would make direct listings more attractive, and that investors would continue to be adequately protected. Companies would have to make certain public disclosures & certifications to the Exchange to be able to take advantage of the flexibility.

Although last week’s order doesn’t indicate that the Commission has reached any conclusions on the proposal, it starts the process for additional analysis & input and gives notice of the grounds of disapproval under consideration. Yesterday, the CII submitted this comment letter in response to the order and the specific questions raised therein. The CII opposes the rule change. In February, the SEC rejected a Nasdaq proposal on the same topic.

We’re continuing to post guidance on this approach to capital raising in our “Direct Listings” Practice Area. So far, they haven’t taken off as a popular path to going public.

Liz Dunshee