SEC Examines Unicorn Debuts at NYSE, Seeking Market Makers’ Data
SEC Examines Unicorn Debuts at NYSE, Seeking Market Makers’ Data
(Bloomberg) -- The U.S. Securities and Exchange Commission asked market makers to hand over data and other information showing how trading is conducted on the opening day of high-profile offerings at the New York Stock Exchange, according to people familiar with the matter.
Recipients of the agency’s requests include Citadel Securities -- the broker-dealer majority owned by Ken Griffin -- and GTS, the people said, asking not to be identified discussing the probe. Yet it’s unclear what concerns investigators have. The inquiries span a number of market debuts for so-called unicorns, including Slack Technologies Inc., the people said. Slack began trading at the NYSE in June under an emerging method known as a direct listing, with Citadel Securities the designated market maker.
The regulator’s interest comes at a pivotal moment for the longstanding Wall Street business of conducting initial public offerings, with high stakes for entrepreneurs, securities firms and investors. Across Silicon Valley, executives and venture capitalists are rallying around direct listings in the belief that they can achieve higher stock prices with fewer fees. The method skips traditional book building by investment banks, relying instead on market makers to match supply and demand on opening day in real time. The deals tend to need fewer banks serving as advisers.
Critics of traditional IPOs say the old method is expensive and often underprices shares to give buyers a “pop” on the first day. Lawyers, market makers and some investment banks have spent years developing direct listings as an alternative, and Slack’s debut last year won it widespread attention. Other unicorns including Airbnb and DoorDash have been looking at similar deals for their own debuts, people familiar with the matter have told Bloomberg.
“The direct listing of Slack was a tremendous success for the company, its shareholders and our nation’s capital markets,” Zia Ahmed, a spokesman for Citadel Securities, said Friday. “From our vantage point, we stand firmly behind the integrity and transparency of the listing and pricing process on this important transaction.”
NYSE spokesman Farrell Kramer said the exchange “places a premium on transparency, fair access and robust price discovery in helping companies access the public markets.”
Spokesmen for the SEC and GTS declined to comment. The Wall Street Journal reported on the inquiries earlier Friday.
To contact the reporters on this story: Sonali Basak in New York at sbasak7@bloomberg.net;Katia Porzecanski in New York at kporzecansk1@bloomberg.net
To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, David Scheer
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