SEC Considers NYSE Proposal to Permit Direct Listings

On September 15, 2017, the SEC issued an order instituting proceedings to determine whether to approve or disapprove a proposed rule filed by the NYSE to amend Section 102.01B of the NYSE Listed Company Manual to permit qualifying private companies to list upon effectiveness of a Securities Exchange Act of 1934 registration statement without a concurrent IPO or registration under the Securities Act of 1933. The proposed rule would require companies to receive an independent valuation of at least $250 million to satisfy the listing requirement. If approved, the proposal would permit the NYSE to create liquid trading markets for large qualifying companies not seeking to raise capital, changing the approach companies use to go public. As an example, the online music streaming service Spotify (most recently valued at $13 billion) is reportedly considering a direct listing of its stock on the NYSE in 2018, instead of pursuing the traditional underwritten IPO route. The SEC indicated that further evaluation of the proposed rule is needed given the potential issues raised, including the implications for price discovery, the role of distribution participants, and the availability of information.