US SEC Approves Rules to Allow Direct Listings on NYSE

Direct listings allow private companies to raise money without going through the high IPO underwriting fees charged by investment banks.

The US SEC (Securities and Exchange Commission) has approved rules changes proposed by the NYSE (New York Stock Exchange) to allow companies to raise capital through direct listings.

Direct listings represent an alternative to traditional IPOs as a way for private companies to raise money without going through the high costsof having investment banks underwrite the transaction.

Previously, the SEC allowed direct listings for companies that were looking to allow existing investors to sell their shares, where the companies did not raise capital in the process. In 2018, music streaming business Spotify was the first major company to list via a direct listing.

Under the amended rules, companies can now also issue new shares to the public in direct listings, presenting a cheaper route for raising capital than the traditional IPO route.

Nasdaq has also filed with regulators for a similar change to its rules.

Additional reporting from Reuters.