SEC Approves NYSE Non-IPO Listing Amendments

As described in an earlier client alert, the NYSE has been seeking to amend its listing standards to permit direct listings of common equity securities on the NYSE by companies without completing an IPO or spin-off transaction. The NYSE has amended its proposal several times, most recently by filing Amendment No. 3 to its proposal on December 8, 2017. The NYSE believes that the amended listing standards are necessary to achieve competitive parity with the Nasdaq Stock Market.

The SEC-approved amendments will permit the NYSE to exercise discretion to list common equity securities of a company upon the effectiveness of a registration statement filed under the Securities Act of 1933. This registration statement must cover only the resale of securities previously sold by the company in private placements, even if (1) there is no unlisted trading of the company’s common equity securities and (2) the company has not previously registered its securities under the Securities Exchange Act of 1934. Amendment No. 3 eliminated changes previously proposed by the NYSE that would have permitted a company to list immediately upon effectiveness of a registration statement filed under the Securities Exchange Act, without requiring any concurrent IPO or other Securities Act registration statement.

The amended NYSE listing standards may make NYSE listing feasible for companies that have sold securities in private placements or Rule 144A offerings, but whose securities are not actively traded or do not trade at all, if the company has filed a resale registration statement under the Securities Act. The amendments do not change the NYSE’s existing process for the initial listing of common equity securities of nontraded REITs that had previously registered the IPO of their common equity securities under the Securities Act and were current reporting companies under the Securities Exchange Act prior to the initial listing.

In order to list without meeting the existing $100 million aggregate market value for the company’s publicly held securities based on a combination of an independent third-party valuation and the most recent trading price for the company’s common stock in a private placement trading system, the NYSE must determine, in its discretion on a case-by-case basis, that the market value of the company’s publicly held common equity securities is at least $250 million. The company must also satisfy existing NYSE qualitative and quantitative listing standards, including corporate governance and trading requirements.

The $250 million market valuation must be provided by an independent third-party valuation agent that “has significant experience and demonstrable competence” in providing such valuations. The valuation agent will not be deemed independent if it or any affiliate:

• beneficially owns an aggregate of more than 5% of the class of securities to be listed (including any right to receive such securities exercisable within 60 days) as of the valuation date; or
• has provided any investment banking services to the company within the 12 months preceding the valuation date or has been engaged to provide investment banking services to the company in connection with the proposed listing or any related financings or other related transactions.

The final NYSE amendments also include a variety of changes that facilitate market supervision by the NYSE.

The full text of the NYSE amendments, marked to show changes, is available on the SEC website.