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NYSE Submits IPO-Alternative Proposal, Nasdaq To Follow

Nasdaq and the New York Stock Exchange (NYSE), the two major stock exchanges in the U.S., are proposing an alternative for corporates looking to raise cash apart from the initial public offering (IPO).

The Financial Times reported last week that Nasdaq and the NYSE are considering allowing businesses to directly list on their exchanges. The NYSE submitted its proposal to the U.S. Securities and Exchange Commission (SEC) last Tuesday (Nov. 26), with Nasdaq informing the publication it would do the same in the near future.

According to reports, the NYSE is proposing a pathway for corporates to raise a minimum of $250 million through "primary direct floor listings," which could be a cheaper alternative to the IPO. The exchange said it would "provide an appropriately liquid trading market," and ensure that companies choosing to take this route to fundraising would still be held to stringent listing requirements.

Reports noted, though, that the NYSE did not explain exactly how businesses would sell shares via a direct listing.

While Nasdaq is planning to submit a similar proposal, the exchange told the publication that the NYSE's proposal does not fully consider "the complexity of the issue." The exchange added that it is continuing "extensive conversations with potential issuers and their advisors, financial institutions and the SEC about the possibility and mechanics" of a direct listing IPO alternative.

In October, unnamed sources told the publication that the SEC would consider allowing such an IPO alternative, which, at the time, was described as a direct listing that would enable existing shareholders to sell their stakes. The SEC declined to comment.

Investors throughout Silicon Valley have been seeking an alternative to the IPO for months, with previous reports in September examining how Spotify and Slack have already used the Direct Listing Process (DLP) to raise funds. Expanding the DLP, proponents have said, would broaden corporates' fundraising opportunities.

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