Nas­daq files with SEC for IPO al­ter­na­tive to raise funds

The Pak Banker - - MARKETS / SPORTS -

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.

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