SEC approves Nasdaq proposal to allow IPO alternative to raise funds
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[May 22, 2021] (Reuters)
- The U.S. Securities and Exchange
Commission (SEC) has approved a proposal by exchange operator Nasdaq Inc
to allow companies to raise capital through direct listings.
In a filing https://bit.ly/3vc3jHV dated May 19, the SEC said Nasdaq's
proposed rule change was consistent with the regulator's rules and
regulations and could be beneficial to investors as an alternative to a
traditional initial public offering.
The move is a big breakthrough for the exchange operator that has been
pushing for an alternative for companies to raise money.
Reuters had reported in August that Nasdaq had filed with the SEC to
change its rules to enable companies that debut on the stock market
through a direct listing to raise capital.
The latest rules will widen the options available to private companies
that are looking to go public, but are wary of the role played by
investment banks in the IPO process.
Prominent venture capitalists like Bill Gurley have often criticized
investment banks, which for decades have organized IPOs, for
underpricing the offerings to help their clients reap large gains when
the stock begins trading on the first day.
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The Nasdaq logo is displayed at the Nasdaq Market site in New York
September 2, 2015. REUTERS/Brendan McDermid
The new IPO alternative could also potentially attract companies that are
currently looking to go public via deals with special purpose acquisition
companies (SPACs), given the recent slowdown in blank-check dealmaking due to a
cooling off in investor appetite and tighter regulatory scrutiny around SPACs.
In December last year, the SEC had approved a proposal by the New York Stock
Exchange to let companies raise capital through direct listings. Prior to that
ruling, the SEC allowed direct listings for companies that did not raise capital
in the process.
In 2018, music streaming business Spotify Technology SA was the first major
company to go public through the direct listing route.
(Reporting by Uday Sampath in Bengaluru; Editing by Anirban Sen and Shailesh
Kuber)
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