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The Securities and Exchange Commission said Wednesday it approved a proposal from the New York Stock Exchange to raise capital through direct listings.
The move is a major breakthrough for the exchange operator, which has pushed for an alternative to traditional first public offerings (IPOs) for companies to raise money.
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It will broaden the available options for private companies that are looking for public but are wary of the role that investment banks play in the IPO process.
“We are not trying to move the IPO. We are trying to create more options for companies and investors trying to address the public markets,” NYSE Vice President and Chief Commercial Officer John Tuttle said in a telephone interview.
NYSE Vice President John Tuttle commented on his exchange’s proposal: “We are not trying to move the IPO. We are trying to create more options.”
The latest development comes at a time when U.S. capital markets are in the midst of an expanded boom after the COVID-19 pandemic slowed IPOs earlier this year.
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Peter Thiel-backed Palantir Technologies and Asana are some of the notable private startups to choose the direct list route this year.
Prior to Wednesday’s ruling, the SEC was allowed to allow direct advertisements for companies that do not raise capital in the process. In 2018, music streaming company Spotify Technology SA was the first major company to be made public by the route.
The NYSE submitted amended proposals in June to enable companies to raise capital through direct listings after the SEC in December rejected similar requests by the exchange operator.
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In its ruling Wednesday, the SEC said it believed the changes proposed by the NYSE were consistent with its rules and regulations.
Reuters reported earlier this week that exchange operator Nasdaq Inc has also filed with regulators for a similar change to its rules.
Prominent venture capitalist Bill Gurley, who has openly criticized the traditional IPO structure, welcomed the statement on Twitter on Wednesday.
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