Nasdaq files with SEC for IPO alternative to raise funds
Exchange operator Nasdaq Inc has filed with U. S. regulators to change its rules to enable companies that debut on the stock market through a direct listing to raise capital, as an alternative to an initial public offering.
The move underscores a desire for an alternative route to the public markets to an IPO, for decades the avenue used by the likes of Amazon. com Inc ( AMZN. O) and Apple Inc ( AAPL. O), amid criticism by venture capital firms that investment banks underprice IPOs to help investors score big gains.
Nasdaq made the proposed rule change in a filing submitted on Monday and which is set to be published by the U. S. Securities and Exchange Commission ( SEC) on Tuesday.
Nasdaq has been working on the filing for around a year, according to a person familiar with the matter. The SEC already allows direct listings for companies that do not raise capital in the process. In 2018, music streaming business Spotify Technology SA ( SPOT. N) was the first major company to go public through a direct listing.
The rival New York Stock Exchange ( NYSE) in June submitted an amended rule change with the SEC that would also enable companies to raise capital through a direct listing.
Nasdaq's proposal would see a company, with the help of an investment bank, set a non- binding price range in advance of the first trade on the exchange, with a fixed number of shares being sold. There is no limit on how much above the price range a company's share price could open; the stock would not open more than 20% below the range.
Under the NYSE's June proposal, a stock would need to open within the proposed price range. There were 109 U. S. IPOs so far this year, as of Aug. 21, excluding special purpose acquisition company ( SPAC) listings, according to IPOScoop. They have delivered an average firstday pop of 35.7%, according to Reuters calculations of IPOScoop data.
Venture capital investors including Benchmark's Bill Gurley have criticized the IPO structure, arguing it allows banks to sell stock at a discount to their clients, who can then reap large gains when the stock begins trading.
Euro zone government bond yields rose on Tuesday as a survey showed business morale in Germany rising more than expected, pointing towards a rebound in Europe's largest economy from its biggest quarterly contraction on record. Germany's Ifo Institute said its business climate index rose to 92.6, its fourth straight monthly increase and stronger than economists had expected, boosting hopes that German companies are recovering from the coronavirus shock.
Analysts said that would be a further sign that Germany's 130 billion euro ($ 153 billion) stimulus package is helping power a recovery.
"It does not take a rocket scientist to predict that the ( German) economy will have one of its best quarterly performances ever in the third quarter," said Carsten Brzeski, chief economist for the euro zone at ING. "All activity indicators point to a continuing increase during the summer months." Germany suffered a record 9.7% downturn in the second quarter as private consumption, investments and exports all collapsed in the
COVID- 19 pandemic.
Germany's 10- year bond yields, a benchmark for the region, rose 5 basis points to a one- week high of - 0.445%, at the higher end of the August trading range of - 0.56% to - 0.40%.
Other euro zone bond yields, from Netherlands to Italy, were up 3 to 7 basis points, with Italian 10- year yields hitting a one- week high of 1.07%.,
The Italy- Germany 10- year yield spread was wider at 150.8 bps but still below its August high of 158 bps. Positive noises on U. S.- China trade negotiations, with both sides reaffirming their commitment to the Phase 1 trade deal, and talk of a COVID- 19 treatment also helped stabilise sentiment and reduce demand for safe- haven euro zone bonds.
Also on Tuesday, Germany sold 4.9 billion euros of two- year bonds in an auction on almost twice as much demand. A consumer confidence reading in the United States is due later in the session. Finland said it had appointed banks for a 10year bond sale via a syndicate of banks, to be launched in the near future, subject to market conditions.