09.02.2020

CII Seeks SEC Review Of Direct Listings

The Council of Institutional Investors filed a notice with the SEC stating our intention to petition for a review of the agency’s August 26 staff decision to permit public companies to raise capital through direct listings on the NYSE.

The petition will ask the five SEC commissioners to review the NYSE proposal, which some experts view as “a game changer” because it allows companies to raise primary capital from a direct listing without the traditional underwriting process.

CII is concerned that companies may attempt to limit their liability to investors for damages caused by false statements of fact or material omissions of fact within registration statements associated with direct listings.

That issue was highlighted by the litigation over the direct listing of Slack, in which the company argued that investors could not challenge a misleading registration statement if they cannot trace their shares to those offered in the registration statement.

CII has urged the SEC to address this issue by establishing a system of traceable shares as part of the commission’s long-overdue proxy plumbing project before approving an expansion of the direct listing regime.

Source: CII

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