The Securities and Exchange Commission has rejected the New York Stock Exchange’s proposal to allow for companies going public through a direct listing to raise capital at the same time.
The NYSE had filed for the rule change last week. The proposal disappeared from its website on Friday, and a spokesperson at the Big Board confirmed it has been rejected.
“We remain committed to evolving the direct listing product,” the NYSE said. “This sort of action is not unusual in the filing process and we will continue to work with the SEC on this initiative.”
An SEC representative declined to comment.
Spotify went public through a direct listing in 2019 and Slack followed this year. Banks are working with numerous other companies, including Airbnb, who want to take that route as an alternative to an IPO.
With a direct listing, companies don’t raise new money and rather allow existing investors, who normally have to wait for a lockup period to expire, to sell into the public market. It’s proving to be an increasingly popular option for companies that don’t need cash, but the NYSE is seeking to make the direct listing more accessible for a wider swath of businesses.
The topic of direct listings started garnering more attention after the Slack offering, as venture capitalists like Benchmark’s Bill Gurley became more vocal in their criticisms of IPOs, which tend to end in large first-day pops that benefit new investors at the expense of insiders and employees. Gurley held an event in San Francisco in early October to educate top investors and pre-IPO tech companies on the benefits of direct listings, and the big investment banks followed with events of their own.