The Intercontinental Exchange

A company goes public when its stock is sold to public market investors for the first time and the value of the entire company is determined when it begins trading on a public exchange. Pricing is determined in the NYSE opening auction based on supply and demand in the market at that time. In a traditional IPO, new primary shares being issued for the first time are sold to a subset of investors the night before public trading. In Direct Listings to date, public trading begins with the sale of shares from existing shareholders. Until now, it was not possible to raise capital via Direct Listings.

Now, we are adding the option for newly issued shares, either alongside existing shares or standalone, to be priced in an opening auction. The value of these newly issued shares represents the capital raised by the company. All of the newly issued shares sold by the company itself must be sold in the opening auction, at one price and at one time. Selling shareholders may also sell in the opening auction if there is demand for additional shares at the opening auction price and may also sell at any time after the opening auction is completed.

In an IPO, newly issued shares are initially priced by agreement among the issuer and the underwriters and sold to public investors by the company’s underwriters. These shares are placed with a group of investors the investment banking syndicate has assembled. Only after this sale is completed can the shares begin trading. The initial trade is executed through an NYSE opening auction.

In a Direct Listing with a capital raise, there are no underwriters and no shares are sold prior to the NYSE opening auction. The initial pricing is established during the auction, in a fully transparent process with the entire market able to participate in setting the price.

Our goal is to provide multiple paths to the public markets so companies can choose the approach that best serves their needs.

In a traditional IPO, the price of newly listed stock can sometimes rise on the first day of trading above the price agreed between the issuer and the underwriters. That gain, also known as the “pop,” represents value the company does not capture from the sale of its shares. Of course, if the price falls during the IPO auction on the first day of trading, the opposite is true, and the company realizes value from the initial stock sale to the underwriters in excess of the proceeds generated from the auction.

A key distinguishing aspect of the Direct Listing versus a traditional IPO is that pricing occurs during the opening auction. Accordingly, in a Direct Listing, the company captures the full value of the initial stock sale at the same time as the opening auction. Thus, it is exposed to the full risk and rewards of the initial stock sale when conducting a Direct Listing.

Companies across all industries will be able to do a Direct Listing with a capital raise. The NYSE has established minimum listing requirements specifically for Direct Listings. Companies using this path to the public markets must either sell a minimum of $100 million of newly issued shares in the Direct Listing or have a combined public float of at least $250 million in both newly issued and existing shares.

Of course, any company conducting a Direct Listing must also meet the NYSE’s listing standards, which are designed to ensure that all our companies meet the same high bar investors have come to expect when a company is NYSE-listed.

Yes. All companies planning a Direct Listing, with or without a capital raise, are required to file a prospectus with the SEC. This is also required of companies planning IPOs. Further, once a company has completed its Direct Listing, it will have to make all SEC-required ongoing public company disclosures, including annual reports and proxy filings.

The NYSE pioneered Direct Listings for a reason. The opening auctions that sit at the heart of pricing Direct Listings are sizable and complex transactions. The NYSE’s unique market model, built on the fact that stocks trade best when human oversight and accountability are integrated with world class technology, allows us to flawlessly execute such transactions.

No other global exchange has this combination, which uniquely positions the NYSE to execute Direct Listings and continue to drive innovation in the capital markets.