SEC Approves NYSE Direct Listing Proposal

The U.S. Securities and Exchange Commission has approved the New York Stock Exchange’s proposal to allow companies to raise capital in a direct listing.

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In a direct listing, a block of shares isn’t sold to investors at a set price, as it is with a traditional IPO (you can read more about the differences between the two methods of financing here). A traditional IPO is a more expensive process, due to bank underwriting fees, but allows a company to raise capital in the going-public process. Now that’s changing.

New York Stock Exchange president Stacey Cunningham tweeted that the development was “great news for capital markets.” 

“This innovation democratizes investor access and provides companies with another path to go public,” she tweeted. 

Perhaps no one is happier about the news than Benchmark venture capitalist and noted IPO pricing critic Bill Gurley. Gurley has been an advocate for direct listings and has spoken out about the IPO process and stocks being mispriced and surging on their first day of trading, therefore leaving money on the table. 

“This is HUGE and will hopefully end 40 years of mispriced IPOs through an old antiquated process that failed to match supply/demand and wasn’t open to all investors,” Gurley tweeted Tuesday.

A wonderful 2020 Xmas present to the founders, employees, & investors at VC-backed startups. SEC just APPROVED the ability to add primary capital (fundraise) to a direct listing. It’s very exciting to see the SEC enable innovation in this way. (more) https://t.co/ksotl0q6c9

— Bill Gurley (@bgurley) December 22, 2020

The rule change could mean more direct listings in 2021, which is already shaping up to be a busy year for companies going public. Affirm, Roblox and Poshmark are among the companies who have filed public S-1 registration statements, while companies like Coinbase and UiPath have filed confidentially.

Some notable direct listings in recent years include Spotify and Slack. This year, both Palantir and Asana chose to go public through a direct listing.

Illustration: Dom Guzman