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NYSE’s plan for direct listing IPO alternative gets SEC approval

Move creates cheaper alternative to traditional initial public offering

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Regulators have approved a proposal from the New York Stock Exchange to let companies raise capital through direct listings, a decision that creates a less-expensive alternative to the traditional initial public offering.

In an order posted online, the Securities and Exchange Commission approved the plan for the NYSE to create a new type of direct listing, in which companies can issue new shares. Previously, companies had only been permitted to use the process for existing investors to sell shares.

In a direct listing, a company floats its shares on a stock exchange, but without hiring banks to underwrite the transaction as in an IPO. In addition to saving on bank fees, the process allows companies to avoid some customary restrictions of IPOs, such as lockup periods that prevent insiders from selling their stock for a set period.

Palantir Technologies, a data-analytics company co-founded by famed investor Peter Thiel, said this week that it would use the unconventional process to go public, following a path pioneered by music-streaming gianSpotify Technology in 2018.

 The primary benefit of the previous format was to let a start-up’s founders and early investors cash out of their stakes, but companies couldn’t use the process to raise capital. Effectively, that made direct listings viable for only a small number of cash-rich start-ups, since most companies go public with the goal of raising fresh capital.

Wednesday’s decision by the SEC could make direct listings a more popular alternative to the traditional IPO. With the NYSE’s new type of direct listing, a company will be able to issue new shares and sell them to public investors in a single, large transaction on the first day of trading, much like the first trade in an IPO.

Potentially, a company could do both the old and new kind of direct listing together, allowing existing investors to sell their shares while also selling newly issued shares to the public.

“This is not intended to displace the IPO, but to provide a new pathway to the public markets that might be better suited to some companies,” NYSE vice chairman and chief commercial officer John Tuttle said in an interview. The NYSE is owned by Intercontinental Exchange.

The new type of direct listing could appeal to Silicon Valley venture capitalists who have long complained about underwriting fees and other costs associated with IPOs. Such critics say Wall Street banks shortchange start-ups during IPOs by buying their shares and then turning around and selling them to the public at a higher price. That means companies can’t fully benefit from a jump in their stock price on the first day of trading, the critics say.

Palantir’s debut, which could happen on the NYSE as soon as next month, would be the highest-profile direct listing since Slack Technologies went public in June 2019. Interest in direct listings has cooled this year as fallout from the coronavirus pandemic has forced many firms to struggle for capital. Palantir, which was valued at $20bn in a 2015 funding round, doesn’t plan to raise capital with its listing.

The SEC approved the NYSE’s plan despite objections from some groups that warned it could harm investors by letting companies circumvent the protections of the IPO process.

The Council of Institutional Investors, a group of pension funds and other big money managers, asked the SEC to reject the plan in a July letter. The council expressed worries that companies going public via direct listings would be able to dodge shareholder lawsuits, due to quirks in US securities laws that were written with more traditional share offerings in mind.

Other critics warned that investors could get burned by price volatility after direct listings. Unlike in an IPO, in a direct listing there is no bank acting as a “stabilisation agent” to prop up the stock if it falls sharply after its debut.

“Direct listings without the appropriate protections could provide a strong incentive and an easier path for company insiders to cash out at inflated valuations, leaving ‘Mr. and Mrs. 401(k)’ holding the bag,” the American Securities Association, a brokerage group, told the SEC in a March letter.

The SEC said in Wednesday’s order that the NYSE’s direct-listing plan had sufficient investor protections. It also said direct listings offered investors some advantages over IPOs, such as giving a broader array of investors the opportunity to get in on a stock’s debut at the initial price.

Earlier this week, the NYSE’s main rival, Nasdaq, released its own proposal to let companies raise capital through direct listings. Nasdaq’s plan is broadly similar to the NYSE’s, but its proposed rules would allow a company’s shares to start trading within a wider price range than a direct listing on the NYSE.

Nasdaq’s plan must be approved by the SEC to take effect. The NYSE first proposed to create the new kind of direct listing in November, and the exchange revised the plan several times before winning approval.

Write to Alexander Osipovich at alexander.osipovich@dowjones.com

This article was published by Dow Jones NEWSPLUS

Source: https://www.penews.com/articles/nyses-plan-for-direct-listing-ipo-alternative-gets-sec-approval-20200827

Private Equity

Alternative Investments: Accelerate Launches An ETF For Alternative Assets

Accelerate Financial Technologies launched its OneChoice Alternative Model Portfolio in September. Aimed at hard-pressed advisors and portfolio managers, the strategy offered a quick and easy way to put together a diversified alternative sleeve within a client’s portfolio. At the time the firm indicated it may follow through with the OneChoice Alternative Model Portfolio in an ETF wrapper. That ETF is making its debut now.

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Alternative Investments: Accelerate Launches An ETF For Alternative Assets

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The Accelerate OneChoice Alternative Portfolio ETF offers uncorrelated returns.

Accelerate Financial Technologies launched its OneChoice Alternative Model Portfolio in September. Aimed at hard-pressed advisors and portfolio managers, the strategy offered a quick and easy way to put together a diversified alternative sleeve within a client’s portfolio. At the time the firm indicated it may follow through with the OneChoice Alternative Model Portfolio in an ETF wrapper. That ETF is making its debut now.

Accelerate OneChoice Alternative Portfolio ETF

This is Canada’s first alternative investment portfolio ETF. Listing on the TSX under the ticker ONEC, the ETF is inspired by the Yale Endowment. (ETF Express)

“Since the 1980s, the Yale Endowment has perfected the alternative asset allocation portfolio,” said Julian Klymochko, Founder and CEO of Accelerate. “We’re continuing our mission of democratizing alternative investments by offering a diversified portfolio of alternative investments in an easy to use, liquid, and low-fee ETF.”

“The Accelerate OneChoice Alternative Portfolio ETF provides investors with a diversified portfolio of alternative asset classes in an easy-to-use ETF with a management fee of only 0.20%,” he added.

Incorporating the OneChoice ETF in a client’s portfolio provides the advantages of increased diversification, improving risk-adjusted returns, and efficient exposure to alternatives without the hassles of portfolio construction, due diligence, and implementation.

Alternative assets

The Accelerate OneChoice Alternative Portfolio ETF (TSX: ONEC) provides exposure to the following asset classes and alternative strategies:

  • Absolute Return – Arbitrage and Long-Short Equity
  • Private Credit – Mortgages and Leveraged Loans
  • Real assets – Infrastructure and Real Estate
  • Alternative Currencies – Gold and Bitcoin
  • Global Macro – Risk Parity
  • Alternative Equity – Alpha + Beta

The ETF charges a management fee of only 0.20%.

Related Story:   Liquid Alt ETF Provider Accelerate Offers Ready-Made Alternative Investment Strategy

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Source: https://dailyalts.com/accelerate-launches-an-etf-for-alternative-assets/

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Private Equity

Digital Assets: Japanese Financial Group SBI Launches Crypto Lending

SBI Group (TYO: 8473) is launching a crypto lending service through SBI VC Trade, its crypto-focused exchange subsidiary. SBI said it will initially allow customers to tender only bitcoin (BTC), but intended to follow up with XRP and ETH lending too.

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Digital Assets: Japanese Financial Group SBI Launches Crypto Lending

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The Group’s crypto arm will offer the service.

SBI Group (TYO: 8473) is launching a crypto lending service through SBI VC Trade, its crypto-focused exchange subsidiary. The Japanese financial powerhouse said it will initially allow customers to tender only bitcoin (BTC), but intended to follow up with XRP and ETH lending too. (COIN TELEGRAPH)

SBI VC Trade Lending

Customers can lend a minimum of 0.1 BTC and a maximum of 5 BTC. That translates to a USD range of $1,918 – $95,920, as per the rate currently prevailing.

Customers will earn interest at the rate of 1% on the cryptos they lend to VC Trade, taxes included. The lending tenure is 84 days.

There are no account management fees or annual membership fees. Japanese yen or cryptocurrency deposits will also not attract a fee. However, a fee will be charged for withdrawal of Japanese Yen.

SBI’s foray into crypto

The Japanese financial giant has made several moves in recent months related to crypto markets. However, it already has a substantial crypto infrastructure in place such as the SBI VC Trade crypto exchange, a crypto mining subsidiary named SBI Crypto, and the SBI-Ripple Asia blockchain network that it runs in conjunction with Ripple.

  • In July, it bought a minority stake in the British liquidity provider B2C2 for $30 million
  • In October, it acquired a controlling stake in the TaoTao crypto exchange from Yahoo Japan.
  • The same month, it launched an unlisted securities fund with a Swiss crypto bank named Syngnum. Worth $66.3 million, the fund would target promising crypto and blockchain startups in Europe and Southeast Asia.

Moreover, partner Ripple may relocate its headquarters to Japan in case it decides to move out of the U.S., further cementing the ties between them.

Related Story:  Ripple Invests In Money Tap, A Subsidiary Of SBI Holdings, Japan                                                  

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Source: https://dailyalts.com/japanese-financial-group-sbi-launches-crypto-lending/

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Private Equity

FinTech: Hippo Insurance Gets $350M Funding From Mitsui Sumitomo Insurance

Hippo, the home insurance unicorn, announced Tuesday an investment of $350 million from Mitsui Sumitomo Insurance Company, Limited, a subsidiary of MS&AD Insurance Group Holdings, Inc. In July, Hippo raised $150 million in a Series E round worth $150 million that valued it at $1.5 billion, post-money.

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FinTech: Hippo Insurance Gets $350M Funding From Mitsui Sumitomo Insurance

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This follows Hippo’s funding in July of $150 million.

Hippo, the home insurance unicorn, announced Tuesday an investment of $350 million from Mitsui Sumitomo Insurance Company, Limited, a subsidiary of MS&AD Insurance Group Holdings, Inc. In July, Hippo raised $150 million in a Series E round worth $150 million. The round valued it at $1.5 billion, post-money. (Silicon Valley Business Journal)

According to Reuters, Mitsui Sumitomo Insurance bought a convertible note in Hippo that will turn into an equity stake the next time it raises new funds. Also included is a potential reinsurance deal between the insurance startup and Mitsui.

The latest transaction “solidifies the strategic partnership between the two companies, which began with MS&AD Ventures’ initial investment in Hippo’s Series E funding round in July 2020,” Hippo said in a statement.

Hippo’s valuation not specified

Hippo Chief Executive Officer Assaf Wand told Reuters that the valuation of $1.5 billion in the July round was no longer relevant given Hippo’s growth and the market developments.

The pandemic has boosted business at insurtechs because customers have shifted to negotiating and buying insurance online.

However, Wand declined to reveal the latest valuation of the startup.

Hippo’s rival and property and casualty insurer Lemonade Inc. (NYSE: LMND) issued shares in its IPO at $29. The shares commenced trading on July 2, and are now trading at $69, delivering a gain of about 138% on the IPO price. The shares touched a high of $86 in July. The listing shows how bullish investors are on the insurance tech sector.

U.S. housing market boom

U.S. home prices surged 7% annually in September, up from a 5.8% annual gain in August. For perspective, this gain is the largest seen since September 2014. Moreover, home prices are now ruling 23% higher than their previous peak in 2006.

The reasons for the surge in home prices are low mortgage interest rates, a crunch in housing supply, and new demand emanating for second homes due to the virus pandemic.

“Heading into winter, demand continues to be strong, driven by mortgage rates which have broken record lows 13 times this year and a growing list of companies which have extended their remote work policies well into 2021,” said George Ratiu, senior economist at realtor.com to CNBC.

These robust conditions are likely to be beneficial for home insurers such as Hippo.

Use of money

Hippo will use the money for capitalizing its insurance and reinsurance companies and for expanding its product to additional states.

By next year, it plans to address 95% of the U.S. homeowner population.

Its insurance products are already available to over 70% of homeowners in the U.S.

Related Story:   Hippo, The Home Insurance Unicorn, Raises $150M

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Source: https://dailyalts.com/hippo-insurance-gets-350m-funding-from-mitsui-sumitomo-insurance/

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