Allison Herren Lee and Caroline Crenshaw are Commissioners at the U.S. Securities and Exchange Commission. This post is based on their recent public statement. The views expressed in the post are those of Commissioner Lee and Commissioner Crenshaw, and do not necessarily reflect those of the Securities and Exchange Commission, the other Commissioners, or the Staff.
Today [Dec. 23, 2020], the Commission approved a new listing rule from the New York Stock Exchange (“NYSE”) which fundamentally shifts how companies can access the public markets. [1] The new listing standard will allow primary direct listings of companies seeking to go public and, importantly, raise capital outside of the traditional initial public offering (“IPO”) process. [2] NYSE’s proposal represents what could have been a promising and innovative experiment. Unfortunately, the rule fails to address very real concerns regarding protections for investors. As a result, we are unable to support this specific approach. [3]
Before delving into the specifics, we believe it is important to acknowledge that the current IPO process is far from perfect. Among other things, the structure often imposes relatively high fees on issuers. Market participants and the Commission should continue to explore ways to innovate and modernize the IPO process, but it need not be at the expense of fundamental investor protections.