SEC Approves NYSE’s Plan for New IPO Alternative

Regulators have approved a proposal from the New York Stock Exchange to let companies raise capital through direct listings, a decision that creates a less-expensive alternative to the traditional initial public offering. According to a story in The Wall Street Journal, the Securities and Exchange Commission approved the plan for  NYSE to create a new type of direct listing, in which companies can issue new shares. Previously, companies had only been permitted to use the process for existing investors to sell shares. In a direct listing, a company floats its shares on a stock exchange, but without hiring banks to underwrite the transaction as in an IPO. In addition to saving on bank fees, the process allows companies to avoid some customary restrictions of IPOs, such as lockup periods that prevent insiders from selling their stock for a set period.