Tag: NYSE

What role should the exchanges play in encouraging board diversity?

Board diversity and how (and whether) to try to achieve it is a topic that has certainly appeared on a lot of corporate governance agendas in the last few years.  Institutional investors have applied pressure on corporations, shareholders have submitted precatory proposals for shareholder votes, investment banks have insisted on diverse boards as preconditions for taking companies public, and California and a number of other states have adopted legislation, whether it be a board diversity mandate, a soft target or simply a disclosure requirement.  Most recently, Nasdaq filed with the SEC a proposal for new listing rules regarding board diversity and disclosure, adopting a comply-or-explain approach. According to Nasdaq’s President and CEO, Adena Friedman, “Nasdaq’s purpose is to champion inclusive growth and prosperity to power stronger economies….Our goal with this proposal is to provide a transparent framework for Nasdaq-listed companies to present their board composition and diversity philosophy effectively to all stakeholders; we believe this listing rule is one step in a broader journey to achieve inclusive representation across corporate America.”​ Interestingly, however, the NYSE has not followed suit.  In fact, in an interview on Bloomberg TV in December, NYSE President Stacey Cunningham said, when asked about the Nasdaq proposal, that it was not something that they were considering adopting at the NYSE: “When we use exchange listing standards to require things like diversity profiles or others, we’re defining the investable universe…. We just don’t think we should be using our listing standards because that forces our views on investors and prevents them from being able to make the choices that they want to make and that they are making.” In contrast to the SEC, whose remit is largely disclosure, the exchanges regularly impose corporate governance requirements.  Should board diversity be one of them?

SEC approves NYSE proposal for direct listings (updated)

[This post has been updated to reflect the joint statement of Commissioners Allison Lee and Caroline Crenshaw, posted today.]

On August 26, the SEC’s Division of Trading and Markets took action, pursuant to delegated authority, to approve a proposed NYSE rule change that would allow companies going public to raise capital through a primary direct listing. (See this PubCo post.) Five days later, that rule change hit a “snag,” as the WSJ put it—the SEC notified the NYSE that the approval order had been stayed because the SEC had received a notice of intention to petition for review of the approval order. The petition, submitted by the Council of Institutional Investors, was granted in September. Yesterday, after cancelling the open meeting scheduled to address the NYSE rule, the SEC approved, by a vote of three to two, the NYSE’s proposed rule change, as amended. According to the NYSE President, the approval “is a game changer for our capital markets, leveling the playing field for everyday investors and providing companies with another path to go public.” Will primary direct listings now replace SPACs as the favored alternative offering format? Some have even suggested that the approval “will ‘unquestionably’ usher in the end of traditional initial public offerings.” That remains to be seen.
Happy holidays! Happy new year!

SEC approves NYSE proposal for direct listings

On August 26, the SEC’s Division of Trading and Markets took action, pursuant to delegated authority, to approve a proposed NYSE rule change that would allow companies going public to raise capital through a primary direct listing. (See this PubCo post.) Five days later, that rule change hit a “snag,” as the WSJ put it—the SEC notified the NYSE that the approval order had been stayed because the SEC had received a notice of intention to petition for review of the approval order. The petition, submitted by the Council of Institutional Investors, was granted in September. Yesterday, after cancelling the open meeting scheduled to address the NYSE rule, the SEC approved the NYSE’s proposed rule change, as amended. According to the NYSE President, the approval “is a game changer for our capital markets, leveling the playing field for everyday investors and providing companies with another path to go public.” Will primary direct listings now replace SPACs as the favored alternative offering format? Some have even suggested that the approval “will ‘unquestionably’ usher in the end of traditional initial public offerings.” That remains to be seen.
Happy holidays! Happy new year!

A couple of quick items regarding IPO alternatives

Here are two quick items regarding popular IPO alternatives, SPACs (special purpose acquisition corporations) and primary direct listings.

No primary direct listings for now—order approving NYSE rule change stayed

On August 26, the SEC’s Division of Trading and Markets took action, pursuant to delegated authority, to approve a proposed NYSE rule change that would allow companies going public to raise capital through a primary direct listing.  (See this PubCo post.) This week, that rule change hit a “snag,” as the WSJ put it—the SEC notified the NYSE that the approval order had been stayed because the SEC had received a notice of intention to petition for review of the approval order. What’s that about?

NYSE persistence pays off—SEC approves primary direct listings

Persistence pays off. In June, the NYSE filed Amendment No. 2 to its application for a proposed rule change to allow companies going public to raise capital through a primary direct listing. Yesterday, the SEC approved that rule change. Prior to this new approval, under NYSE rules, only secondary sales were permitted in a direct listing, which meant that companies that had conducted direct listings looked more like well-heeled unicorns, where the company was not necessarily in need of additional capital. The new rule change is likely to be a game changer for the traditional underwritten IPO. So much so, in fact, that Nasdaq has now also submitted an application to permit companies to conduct direct listings with capital raises. (Update: This order has been stayed. See this PubCo post.)

NYSE takes another crack at primary direct listings—will it succeed?

In late November last year, the NYSE filed with the SEC a proposed rule change that would have allowed companies going public to raise capital through a primary direct listing. Under current NYSE rules, only secondary sales are permitted in a direct listing.  As a result, thus far, companies that have embarked on direct listings have looked more like well-heeled unicorns, where the company was not necessarily in need of additional capital.  The new proposal seemed to be a potential game changer for the traditional underwritten IPO. (See this PubCo post.)  However, as reported by CNBC and Reuters, a little over a week later, the SEC rejected the NYSE’s proposal, and it was removed from the NYSE website, causing a lot of speculation about the nature of the SEC’s objection and whether the proposal could be resurrected. At the time, an NYSE spokesperson confirmed to CNBC that the proposal had been rejected, but said that the NYSE remained “‘committed to evolving the direct listing product…This sort of action is not unusual in the filing process and we will continue to work with the SEC on this initiative.’” (See this PubCo post.) The NYSE did persevere, and the proposal was refiled in December with some clarifications and corrections. But then—silence. In January and February, the NYSE had four meetings with SEC staff, including folks in Chair Clayton’s office, presumably to make the case for the proposal.  A number of public comment letters, of divided opinion, were submitted. Apparently, the SEC remained unconvinced, designating a longer period to decide, and then in late March, issued an Order instituting proceedings to determine whether to approve or disapprove the proposed rule change.  Undaunted, the NYSE is giving it another go and has just filed Amendment No. 2.   Will it be enough to convince the SEC?

NYSE tolls compliance period for certain continued listing requirements

Like Nasdaq (see this Pubco post), the NYSE has filed with the SEC, and the SEC has declared immediately effective, a rule change providing relief to listed companies that, in light of market conditions resulting from the impact of COVID-19, have fallen out of compliance with two of the NYSE continued listing standards. The relief will provide listed companies with a longer period to regain compliance with the Dollar Price Standard (i.e., when the average closing price of the security is less than $1.00 over a consecutive 30 trading-day period) and the $50 Million Standard (i.e., when a company’s average global market cap over a consecutive 30 trading-day period is less than $50 million and, at the same time, stockholders’ equity is less than $50 million) by tolling the compliance periods through June 30, 2020. Since the last week of February 2020, the NYSE has witnessed an unusually high number of listed companies that have fallen out of compliance with these continued listing standards. The NYSE “believes that it is undesirable to impose on companies in the midst of this crisis the additional burden of attempting to return to compliance with these market price-based standards while the crisis is ongoing, which may be unrealistic for many companies in the immediate term whereas their prospects may be better once the current extraordinary conditions have passed.”

It’s baaack—NYSE refiles (and then amends) proposal for primary direct listings

In late November, the NYSE filed with the SEC a proposed rule change that would have allowed companies going public to raise capital through a primary direct listing. Under current NYSE rules, only secondary sales are permitted in a direct listing.  As a result, thus far, companies that have embarked on direct listings have been more of the unicorn variety, where the company was not necessarily in need of additional capital.  The new proposal looked like it could be a game changer for the traditional underwritten IPO. (See this PubCo post.)  But then, as reported by CNBC and Reuters, a little over a week later, the SEC rejected the NYSE’s proposal, and it was removed from the NYSE website, causing a lot of speculation about the nature of the SEC’s objection and whether the proposal could be resurrected. At the time, an NYSE spokesperson confirmed to CNBC that the proposal had been rejected, but said that the NYSE remained “‘committed to evolving the direct listing product…This sort of action is not unusual in the filing process and we will continue to work with the SEC on this initiative.’” (See this PubCo post.) Apparently, the NYSE meant what it said: the proposal was just refiled with some clarifications and corrections, and then, on Friday afternoon, the NYSE filed an amendment to the refiled proposal, which supersedes the earlier filing in its entirety. So now we’re back at the starting gate.

SEC fast tracks a “no” to NYSE primary direct listing proposal

You’d have to assume that the SEC didn’t spend a whole lot of time agonizing over the rule proposal—as reported by CNBC and Reuters, it took only a little over a week for the SEC to reject the NYSE’s proposed rule change that would have allowed companies going public to raise capital through primary direct listings. (See this PubCo post.)  It remains to be seen whether the SEC is opposed to the concept in general, making rehabilitation of the proposal unlikely, at least in the near term, or whether the proposal could be quickly resurrected after some fixes to the proposal (or to other rules to accommodate the proposal).