By Niket Nishant, Reuters
The New York Stock Exchange said on Thursday it has invited companies to test the direct listing process in an effort to promote the use of the budding initial public offering (IPO) alternative.
The goal of the test, scheduled for Oct. 17, is to highlight to companies looking to go public how a direct listing will function when new shares are sold and money is raised.
In the four high-profile direct listings done since 2018, including those of music streaming company Spotify Technology <SPOT.N> and data analytics firm Palantir Technologies <PLTR.N>, no new funds were raised, as is typical in the case of a traditional IPO.
Shares of Palantir and workplace app Asana <ASAN.N>, which also went public through a direct listing, were down about 6% and 13%, respectively, below their debut price, as of Wednesday’s close. Direct listings have enabled existing investors to sell their shares and led to investment banks playing less of a role in deciding the price at which shares are sold. The U.S. Securities and Exchange Commission has approved a proposed rule by the NYSE to allow companies to raise capital through a direct listing. Supporters of the direct listing model have criticized IPOs as chummy deals that allow bankers to allocate the most shares to their top clients.