On December 15, 2022, the New York Stock Exchange ("NYSE") received approval from the Securities and Exchange Commission ("SEC") to modify certain pricing limitations for companies undertaking a direct listing involving sales of company shares in the opening auction on the first day of trading on the NYSE. The approval and related conditions are consistent with the approval granted by the SEC to Nasdaq earlier this month as we previously blogged. The rule change provides that a direct listing with a primary offering may proceed so long as (i) the actual price is set at or above the price that is 20% below the lowest price within the disclosed price range or (ii) the actual price is set at or below the price that is 80% above the highest price of the disclosed price range. In order to rely on the additional pricing flexibility, the company is required to publicly disclose and certify to the NYSE that the company does not expect that such price would materially change the company's previous disclosure in its effective registration statement and that its effective registration statement contains a sensitivity analysis explaining how the company's plans would change if the actual offering proceeds are less than or exceed those that would be raised if the offering were to proceed at a price within the disclosed price range. As part of the rule change, the NYSE also requires that the company retain an underwriter with respect to the primary sales of shares and identify the underwriter in its effective registration statement. While the requirement to include an underwriter mitigated the SEC's concerns relating to traceability and the perceived lack of a "gatekeeper" that often arise, the perception of increased securities liability for the identified underwriter will likely increase the costs associated with conducting a direct listing with a capital raise and potentially diminish the likelihood that this alternative to a traditional IPO will be pursued.
A link to the SEC's approval can be found here.
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