The New York Stock Exchange has won the approval of regulators to allow companies new shares through direct listings, creating a cheaper alternative to the traditional first public offering.
The Securities and Exchange Commission said Wednesday night in an order that it approved a new type of direct listing where companies can simultaneously publicize and cash out public-market investors. Previously, companies that made direct listings were only allowed to allow existing private shareholders to sell shares to public investors.
The move from the NYSE came as a record number of companies have turned to SPACs, as special purpose firms, as a back door to be named at stock exchanges this year. A SPAC is a blank-check company that is set up to raise funds to finance a merger or acquisition within a certain time frame, typically two years. The target company will be made public through the purchase.
There have been 67 SPAC bids worldwide this year, raising a record $ 23.9 billion, representing nearly one-fifth of total funds through initial public bids totaling $ 115.9 billion, according to Refinitiv. Of the 67 worldwide listings, 61 are listed in the US.
Companies have withdrawn from the traditional IPO market due to the coronavirus pandemic and wild volatility. Nikola and DraftKings both went on to name the SPAC route at stock exchanges, and Bill Ackman last month launched the largest SPAC in history, worth $ 4 billion.
Earlier this week, data analytics firm Palantir Technologies announced its plan to debut on public markets with an immediate mention. The company intends to trade on the NYSE under the ticker PLTR, presumably with a valuation of at least $ 26 billion. Slack and Spotify have also made this route public in recent years.
The new NYSE direct mail advertising structure may limit some of the enthusiasm in the booming SPAC market, as it provides similar benefits. Companies can skip the roadshow process and avoid some of the control that goes with a traditional IPO.
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