In a major move to encourage more companies to go public, the U.S. Securities and Exchange Commission has approved a New York Stock Exchange plan to allow issuers to raise new capital through a “direct” listing.
The rule change announced on Tuesday will give companies an alternative to the traditional public offering, enabling them to list their shares without having to pay hefty fees to Wall Street underwriters.
Previously, the SEC only allowed companies to sell existing shares through a direct listing, not raise new capital.
NYSE President Stacey Cunningham said the SEC had approved a crucial innovation for private companies breaking into public markets.
“Some of them will continue to choose a traditional IPO but others will have this as an alternative if they want to reduce their cost of capital and they want to have a democratized access to their company on the first day,” she told CNBC.