NYSE proposes allowing companies to raise capital in direct listings

The New York Stock Exchange yesterday laid the formal groundwork for letting companies raise capital as part of direct listings.

Why it matters: This could upend the traditional IPO market, which has relied on Wall Street banks to set pricing terms.

Background: We first discussed the possibility of hybrid listings back in June, in preparation of Slack's direct listing (through which the company itself raised no money). Three months later we broke news on how a group of Silicon Valley investors and attorneys were hosting an invite-only meeting to gain further support for hybrid listings, arguing that the normal IPO process too often benefits bank clients at the expense of issuers.

What's new: NYSE's proposal would let both the company and company insiders sell stock at listing, so long as the company sells at least $250 million worth of shares. There are no new lockup requirements.

• An exchange spokesperson writes: "This represents the next step in the development of the Direct Listing, which the NYSE pioneered with Spotify in 2018 and Slack earlier this year."

What's next: The filing kicks off a public comment period, after which NYSE's plan will be approved or rejected. The Nasdaq also has said that it's working with the SEC on a direct listing plan.

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