Insight

In August 2020, following a lengthy on-again/off-again process, the SEC approved a proposed New York Stock Exchange rule that would allow companies to go public through a primary “direct” listing – a sale directly to the public, without underwriters, underwriting commissions, or roadshows, among other things.  However, just a few days later, the SEC stayed the approval because it had gotten notice of petition to review the approval. 

Then, on December 22, 2020, following the cancellation of the open meeting at which it was to consider the rule a second time, the SEC approved the NYSE’s proposal by a 3-2 vote, with the two Democratic appointees dissenting, as was common in 2020. 

In general terms, a company that seeks to effect a direct listing must satisfy the NYSE’s requirement to have at least $100 million aggregate market value.  However, the new rule will consider a company to have met the requirement (a) if it sells shares with $100 million or more in the opening auction on the first day of trading, or (b) where the market value of publicly held shares is less than $100 million, if the aggregate market value of the shares the company is to sell in the opening auction, together with the shares eligible for inclusion as publicly held shares immediately prior to the listing, is at least $250 million.  The direct listing can include sales by selling shareholders, and officers, directors, and 10%+ holders can purchase shares sold in the opening auction by the company or by selling shareholders.

As suggested by its turbulent history, the rule has generated quite a bit of controversy. Proponents say it will reduce the costs and other complexities involved in a traditional IPO, while opponents say it will eliminate the investor protections afforded by a traditional IPO and, in fact, may result in the demise of the traditional IPO altogether.

Additional details will be discussed in an upcoming posting on the Securities Edge blog. In the interim, please direct any questions or observations to Gunster securities law and corporate governance practice leader Bob Lamm.

YES! PLEASE SIGN ME UP TO RECEIVE EMAIL ALERTS FROM OTHER GUNSTER PRACTICE AREAS.

This publication is for general information only. It is not legal advice, and legal counsel should be contacted before any action is taken that might be influenced by this publication.

About Gunster
Gunster, Florida’s law firm for business, provides full-service legal counsel to leading organizations and individuals from its 12 offices statewide. Established in 1925, the firm has expanded, diversified and evolved, but always with a singular focus: Florida and its clients’ stake in it. A magnet for business-savvy attorneys who embrace collaboration for the greatest advantage of clients, Gunster’s growth has not been at the expense of personalized service but because of it. The firm serves clients from its offices in Boca Raton, Fort Lauderdale, Jacksonville, Miami, Orlando, Palm Beach, Stuart, Tallahassee, Tampa, Vero Beach, and its headquarters in West Palm Beach. With nearly 200 attorneys and 200 committed support staff, Gunster is ranked among the National Law Journal’s list of the 500 largest law firms and has been recognized as one of the Top 100 Diverse Law Firms by Law360. More information about its practice areas, offices and insider’s view newsletters is available at www.gunster.com.

Related Professionals

Jump to Page

Gunster Cookie Preference Center

Your Privacy

When you visit our website, we use cookies on your browser to collect information. The information collected might relate to you, your preferences, or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. For more information about how we use Cookies, please see our Privacy Policy.

Strictly Necessary Cookies

Always Active

Necessary cookies enable core functionality such as security, network management, and accessibility. These cookies may only be disabled by changing your browser settings, but this may affect how the website functions.

Functional Cookies

Always Active

Some functions of the site require remembering user choices, for example your cookie preference, or keyword search highlighting. These do not store any personal information.

Form Submissions

Always Active

When submitting your data, for example on a contact form or event registration, a cookie might be used to monitor the state of your submission across pages.

Performance Cookies

Performance cookies help us improve our website by collecting and reporting information on its usage. We access and process information from these cookies at an aggregate level.

Powered by Firmseek