Late last year, we were tracking the saga of the NYSE’s “direct listing” proposal for primary offerings. A lot has happened since then, and you’d be forgiven if you assumed that going public without the benefit of a traditionally marketed and placed IPO was no longer a very attractive option. But the NYSE hasn’t given up hope that we’ll return to better times. Last week, they filed the third version of a proposed rule change that would permit companies to raise money in a “direct listing.”
As a recent Davis Polk memo explains, this version of the proposal gives more detail about the mechanics of a direct listing — but it would also make this path available to fewer companies:
The NYSE’s current proposal eliminates the 90-day grace period that was previously proposed for the minimum holder requirement. As a result, both primary and secondary direct listings would continue to be subject to the requirement to have 400 shareholders at the time of initial listing.This requirement will continue to preclude many private companies from pursuing a direct listing because they do not having the required number of round lot holders.
Unlike the prior proposals, this version also provides more granular detail around the auction process for a primary direct listing. Significantly, the auction process would require that the company disclose a price range and the number of shares to be sold in the SEC registration statement for a primary direct listing, and would require that the opening auction price be within the disclosed price range. For purposes of the opening auction, the company would be required to submit a limit order for the number of shares that it wishes to sell, with the limit set at the bottom end of the price range. The proposed rule changes would not allow the company’s limit order to be cancelled or modified, and the limit order would need to be executed in full in order to conduct the primary direct listing
-Liz Dunshee, TheCorporateCounsel.net July 2, 2020
