SEC’s Direct Listings Expansion Could Invite New Risks

Law 360 – In a story about how direct listings could pose risk, Healthy Markets Executive Director Gellasch noted that underwriters can also push back on controversial corporate governance structures that may not sit well with investors, such as voting arrangements that grant outsize control to founders. In addition, underwriters can arrange for research coverage of a newly public company and have other tools to stabilize post-IPO trading.

“It makes investing in an IPO much more of a gamble for investors,” Gellasch said of direct listings with capital raises. “Investors are likely to lose third-party verification of the company’s finances and operations, legal liability protections and potential sources for research and trading help after the IPO.” (Full Story).

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