NYSE to permit capital raise as part of a company's direct listing

NEW YORK (Reuters) – The New York Stock Exchange (NYSE) said on Tuesday it had filed with the U.S. Securities and Exchange Commission to allow companies going public through a direct listing, instead of a traditional initial public offering, to raise capital.

“This represents the next step in the development of the direct listing, which the NYSE pioneered with Spotify in 2018 and Slack earlier this year,” a NYSE spokeswoman said in a statement.

A direct listing has so far differed from an IPO because it does not raise fresh funds; rather it is a way for existing investors to monetize their shares.

The direct listing model also offers an opportunity to save significantly on investment banking fees and avoid restrictions on insider stock sales.

The method was pioneered last year by music streaming business Spotify Technology SA (SPOT.N) in 2018, with workplace messaging and communication platform Slack Technologies Inc (WORK.N) earlier this year then also opting for a direct listing over an IPO.

Both Spotify and Slack had successful market debuts but their share prices have since struggled.

In October, venture capitalists and executives from more than 100 startups, including Airbnb Inc and Poshmark, gathered to bash traditional IPOs and promote direct stock exchange listings, Reuters reported.