AUS
NZ
UK
CA
USA
IND
Summary
- The commission’s ruling is a significant victory for the exchange, which has been pushing for the rule change for quite some time.
- The SEC also had earlier approved a similar petition filed by the New York Stock Exchange (NYSE).
- As per the NASDAQ proposal, companies can set a non-binding price range with banks in advance on a fixed number of shares sold.
In a significant move, the US Securities and Exchange Commission (SEC) has cleared a proposal by the NASDAQ stock exchange to allow firms to raise capital via a direct listing.
Responding to its appeal, the SEC said in a filing last week that NASDAQ’s proposal is in line with the existing rules, and firms may be benefitted if they can raise funds through the direct listing process. Currently, the companies raise funds via the traditional IPO (initial public offering) mode.
The commission’s May 19 ruling is a major victory for the exchange, which has been pushing for the rule change for quite some time. The companies will now have an alternative way to raise funds. The NASDAQ exchange had filed for the rule change in August last year.
In its application, the exchange pleaded that companies that opt for a direct listing, like SPAC mergers, be allowed to raise capital. The rule change will likely attract more companies to opt for direct listing via SPAC (special purpose acquisition companies) deals.
Also Read: 3 Quantum Computing Stocks To Explore: Amazon, IBM, AMD
Source: Pixabay.
Also Read: Cabot Oil & Gas To Merge With Cimarex Energy In a US$17Bn Deal
NASDAQ Proposal
As per the NASDAQ proposal, companies can set a non-binding price range with banks in advance on a fixed number of shares being sold, regardless of how high the stock may open on the first trading day. It will not open if it drops below 20% of the price range.
Analysts say that companies sometimes underprice their offerings due to pressure from investment banks during the IPO process. Banks at times do that to keep their investors happy by allowing them to reap large gains when the stock opens for trade, they say.
The SEC also had earlier approved a similar petition filed by the New York Stock Exchange (NYSE). Last December, the SEC allowed NYSE to let firms raise money through a direct listing. Before that ruling, companies were not permitted to raise capital via the direct listing process.
