In today's world, businesses need even more flexibility and transparency to meet evolving customer, talent and market demands. Going public is a powerfully effective solution to meet those needs but companies no longer need to view an IPO as their only path to public.
That’s why the NYSE worked closely with issuers, regulators and the global market community to create the NYSE Direct Listing. In a Direct Listing, the full liquidity of the market values a company on day one without temporary constraints — no reduced allocations or required lockup periods. This uninhibited price discovery reduces the cost of capital and democratizes access and opportunity for all investors.
The NYSE helped to pioneer the first ever Direct Listing with Spotify in 2018 followed by Slack in 2019. In 2020, we welcomed Asana and Palantir via this innovative approach—on the very same day.
Direct Listings are just one of the ways the NYSE is using innovation to drive opportunity for modern businesses.
“We’ve been working with the SEC on the ability to raise primary capital and price that primary capital offering on the Exchange at the time of the opening trade.”
— Stacey Cunningham on CNBC
"This is a game changer for the capital markets."
— John Tuttle on CNN
“This is a game changer for our capital markets, leveling the playing field for everyday investors and providing companies with another path to go public at a moment when they are seeking just this type of innovation.”
— Stacey Cunningham at S&P Global
Flexible capital-raising options
Lower cost of capital and no forced timeline
Full and equal transparency
Democratized access to information
Level playing field for all investors - no allocations, no lock up periods
Plus, all the premium benefits of being a NYSE listed company
Financial Advisor Roles
Financial advisors are not required to underwrite an initial price like a traditional IPO, but they are essential in consulting alongside with the NYSE to set the reference price for Day 1.
Day 1 has an extensive price discovery process with a Designated Market Maker (a model unique to the NYSE) on the trading floor, who determines the opening price based on buy and sell orders in consultation with the financial advisor, using the reference price as a starting point.
Flexibility on the Direct Listing process allows a company to go effective without a waiting period after filing their S-1. Previous listed companies have utilized this feature to opt for an Investor Day in lieu of a Roadshow.
Public Access and Transparency
The Direct Listing provides access and opportunity for all investors, democratizing public company offerings even further than before.
Day 1 Trading
With the unique market model able to execute such an offering, NYSE Direct Listings have traded with superior market quality in both lower volatility and tighter spreads on Day 1 compared to IPOs*.
Slack, Palantir, and Spotify, listed on the NYSE, ranked among the largest opening trades in the history of the US markets.
Optional Capital Raise
Companies conducting Direct Listings on NYSE have the option to raise capital as part of their listing. This happens through a single order, which is executed as part of the opening auction.
Only at the NYSE
The NYSE is the only exchange that has launched a Direct Listing and worked with the SEC to further develop this approach.
The NYSE is the only exchange to provide a Designated Market Maker to minimize volatility and discover market demand price assessment with unparalleled precision.
*NYSE and Nasdaq averages include all Tech IPOs from 2018-2019 YTD Volatility
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.
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.