SEC Considers NYSE Proposal to Permit Direct Listings: SEC to Determine Whether to Approve NYSE’s Proposal to Permit Listings of Qualifying Private Companies Without Securities Act Registration

Sullivan & Cromwell LLP - September 26, 2017

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. Under the proposal, companies would need 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 way companies approach selling shares to the public. Spotify, an online music streaming service most recently valued at $13 billion, is reported to be considering a direct listing of its stock on the NYSE in 2018, rather than pursuing the traditional underwritten IPO route. The SEC indicated that further evaluation of the proposal is appropriate in light of the legal and policy issues raised, including the implications for price discovery, the role of distribution participants, and the availability of information. The SEC is soliciting comments on the proposal through October 12, 2017.