SEC Approves NYSE Direct Listings Proposal and Amends the Definition of an Accredited Investor

Direct Listings¹ on the New York Stock Exchange (NYSE)

On August 26, 2020, the SEC approved an NYSE proposal to permit a company conducting a direct listing on the NYSE to also sell new shares to the public in order to raise capital as part of the transaction. Previously, an NYSE direct listing only allowed for the resale of shares held by existing stockholders. Under the amended rules, shares not previously registered under the Securities and Exchange Act of 1934 may be eligible for sale under a “Primary Direct Floor Listing” so long as the market value of new shares sold to the public is at least $100 million, or the market value of the shares prior to the Primary Direct Floor Listing and the new shares sold to the public aggregate to an amount of at least $250 million.

However, following the SEC's approval, the Commission received a notice of intention to petition for review of the proposal.  Accordingly, the SEC's approval of the proposal is stayed until further notice.    

 

Accredited Investor Definition

On the same day, the SEC adopted amendments to the definition of an “accredited investor” under SEC rules. Accredited investors have greater access to private capital market transactions.  Previously, the qualifications of an accredited investor were focused solely on the investor’s income and net worth, whereas, the amended definition is intended to allow other institutional and individual investors to qualify if they have the requisite financial knowledge, sophistication and expertise. The SEC also amended the definition of a “qualified institutional buyer” under Rule 144A, expanding the list of eligible entities that meet the definition. 
 
For more information on these amendments, please refer to the SEC press release and final rules.
 
The amendments to the definition will become effective 60 days after publication in the Federal Register.